PTD 2013 Judgments

2013 P T D 1127

[Appellate Tribunal Inland Revenue Islamabad Bench]

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

C.I.T., ISLAMABAD

Versus

Messrs O.G.D.C. (PVT.) LTD., ISLAMABAD

I.T.As. Nos. 306/IB to 309/IB, 209/IB, 210/IB, 1348/IB to 1350/IB, 203-A/IB, 205/IB, 1074/IB, 1075/IB, 251/IB, 252/IB, 171/IB, 381/IB, 390/IB, 391/IB of 2004 and 574/IB, 204/IB of 2006, decided on 20th February, 2013.

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

----Fifth Sched., Part-1, R.3---Rules for the computation of the profits and gains from the exploration and production of petroleum---Depletion allowance---Depletion allowance could not be given to person who did not own the asset, i.e. oil or gas reserves which were the property of the State---Taxpayer's assets comprise fixed assets, machinery and equipments in respect of which they were validly entitled to depreciation---In addition to depreciation allowance for their depreciated assets, tax payers had been prized with entitlement to depletion allowance for the asset which only belonged to the State or People of Pakistan---By depletion of oil or gas reserves, the taxpayer did not suffer any loss of their assets---Sine the matter had been decided by the larger Bench of the Appellate Tribunal in favour of the department, the treatment given by the Department was upheld by the Appellate Tribunal.

I.T.As. Nos.433 to 436/IB of 2008 rel.

(b) Income Tax---

----Decommissioning cost, disallowance of---In view of a judgment of the Appellate Tribunal, the action of Assessing Officer in disallowing decommissioning cost was upheld by the Appellate Tribunal---Order accordingly.

I.T.A. No.238/IB of 2007, dated 25-10-2008 rel.

(c) Income Tax---

----Re-computation of income---Taxpayer contended that Assessing Officer ignored the directions of the First Appellate Authority and instead of giving credit for taxes already paid, had assessed higher income which was not sustainable under the law---Validity---Assessing Officer was directed by Appellate Tribunal to compute income in accordance with the findings of the First Appellate Authority and also directed to allow credit of tax paid/suffered at source after due verification as per law.

(d) Income Tax---

----Arbitration order---Annulment of assessment---Taxpayer contended that the First Appellate Authority directed the Assessing Officer to follow the arbitration order; and the said order was not implemented; and Assessing Officer proceeded to compute income as per original order---First Appellate Authority found that non-compliance by the Assessing Officer was beyond his jurisdiction particularly on the basis of his opinion---Validity---Assessing Officer was directed to follow the arbitration order; it was imperative to look as to whether the arbitration order was made under any provision of the Income Tax Ordinance, 1979 and had any legal sanctity and was worth implementation---Record showed that the arbitration order was not implemented by the Assessing Officer for there being no provision available in the Income Tax Ordinance for implementation---Department, in circumstances, was allowed to give similar treatment on the issues decided by the Appellate Tribunal in other years.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.66A---Amendment of assessment---Assessment years 1996-97 to 1998-99---Issue of invoking provision of S.122 of the Income Tax Ordinance, 2001 or 66A of the Income Tax Ordinance, 1979 to the assessments finalized before 30-6-2002 had already been decided by the Supreme Court of Pakistan---Order passed under S.12 of the Income Tax Ordinance, 2001 for the assessment years 1996-97 to 1998-99 was annulled by the Appellate Tribunal, since assessment orders had been annulled, there was no need to adjudicate the cases on merit---Appeals filed by the taxpayer were accepted.

Messrs Elli Lilly (Pvt.) Ltd. ?? rel.

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

----S.122(5A)---Amendment of assessment---Jurisdiction of Additional Commissioner---Taxpayer contended that Additional Commissioner had assumed jurisdiction in the case directly whereas, under the law the requirement was that the Commissioner Inland Revenue should have initiated the proceedings, and for finalization of amendment the Additional Commissioner should have come into the picture after delegation of power to him by the Commissioner Inland Revenue, such procedure having not been followed, the proceedings became illegal---Validity---Additional Commissioner could reopen the case in the matter of deemed assessment made in the name of Commissioner---Appellate Tribunal decided the issue in favour of the Department.

CPD No.3048 of 2010 dated 7-5-2012 rel.

Tahir Khan, D.R. for Appellant (in I.T.As. Nos. 306/IB, 307/IB, 308/IB, 309/IB, 209/IB, 210/IB of 2004 and 574/IB of 2006).

Khalid Mehmood, FCA for Respondent (in I.T.As. Nos. 306/IB, 307/IB, 308/IB, 309/IB, 209/IB, 210/IB of 2004 and 574/IB of 2006).

Khalid Mehmood, FCA for Appellant (in I.T.As. Nos. 1348/IB, 1349/IB, 1350/IB, 203-A/IB, 205/IB, 1074/IB, 1075/IB, 251/IB, 252/IB, 171/IB, 389/IB, 390/IB and 391/IB of 2004 and 204/IB of 2006).

Tahir Khan, D.R. for Respondent (in I.T.As. Nos. 1348/IB, 1349/IB, 1350/IB, 203-A/IB, 205/IB, 1074/IB, 1075/IB, 251/IB, 252/IB, 171/IB, 389/IB, 390/IB and 391/IB of 2004 and 204/IB of 2006).

Date of hearing: 20th February, 2013.

2013 P T D 1152

[Appellate Tribunal Inland Revenue Islamabad Bench]

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

C.I.T., ISLAMABAD

Versus

Messrs ZHONGXING TELECOM, ISLAMABAD

I.T.A. No.818/IB of 2012, decided on 22nd February, 2013.

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

----Ss. 122(2) & 120---General Clauses Act (X of 1897), S.6(c)--- Amendment of assessment---Limitation---Taxpayer contended that assessment stood completed on 2-2-2006 in terms of S.120 of the Income Tax Ordinance, 2001, when the return was filed after seeking extension in time limit for filing the return; and that subsection (2) of S.122 of the Income Tax Ordinance, 2001 was inserted vide Finance Act, 2009 and period of five years would start from the end of financial year 2005 i.e. 31-12-2004 as per the provision of subsection (6); and order had been passed on 30-6-2012 after the time limit of five years---Revenue contended that subsection (2) of S.122 of the Income Tax Ordinance, 2001 was substituted by the Finance Act, 2009; and comparison of the present provisions of subsection (2) and the provisions substituted, revealed that there was no change in any substantive provision of law; and provisions of subsection (2) of S.122 of the Income Tax Ordinance, 2001 being not a change in substantive law would apply retrospectively---Validity---Right of amendment of assessment of the case ceased up to 1-2-2011 consequent upon filing of return/deemed assessment on 2-2-2006 as per law then prevailing---Department could amend the assessment up to 1-2-2011 only; and deemed assessment was amended on 30-6-2012 which could be amended up to 1-2-2011---For tax year, 2005, return was filed on 2-2-2006 and amendment was made on 30-6-2012---Taxpayer contended that assessment stood made on the date of filing of return and as per law prevailing at that point of time, amended assessment could only be made within five years i.e. up to 1-2-2011 and that amendment made in subsection (2) of S.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 found that amendment was applicable retrospectively, it did not bring about change in any substantive provision---Held, amendment had been made in procedural/machinery provision having applicability retrospectively---Tax liability had been enhanced through amendment which was barred by limitation---Vested right of finalized assessment of the case up to 1-2-2011 had accrued to the taxpayer consequent upon filing of return/deemed assessment on 2-2-2006 as per law then prevailing---Department could complete the assessment up to 1-2-2011 only---Amended order was barred by time and void ab initio.

Zakria H.A Sattar Bilwani v. IACWT/Range-II, Karachi 2003 PTD 52; Muhammad Ishaq v. State PLD 1995 SC 256; State v. Muhammad Jamil PLD 1965 SC 681; Abdul Rehman v. Settlement Commissioner PLD 1966 SC 362 and Nagina Silk Mills v. ITO. 1963 PTD 633 rel.

Tahir Khan, D.R. for Appellant.

Muddassir Khalid, FCA for Respondent.

Date of hearing: 22nd February, 2013.

2013 P T D 1121

[Appellate Tribunal Inland Revenue (Pakistan) Karachi]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheem-ul-Haq Khan, Accountant Member

YAWAR BADAT, KARACHI and another

versus

OIR, U-8 AD-III (RTO), KARACHI and another

I.T.As. Nos. 87/KB, 22/KB to 24/KB of 2012, decided on 20th February, 2013.

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

----Ss. 122(1)(9), 120, 177, 37(5), 111 & 182----Amendment of assessment---Adjustment of loss of Association of Persons against salary income was disallowed; and addition from gain arising on sale of immovable properly (plot) treating the same as adventure in the nature of trade and income from undisclosed source under S.111 of the Income Tax Ordinance, 2001; and penalty was also imposed under S.182(1) of the Income Tax Ordinance, 2001---Addition on account of disallowance of adjustment of loss from Association of Persons was confirmed by the First Appellate Authority---Reply of taxpayer in respect of gain on sale from immovable property was considered general in nature and not convincing; and addition made being in the nature of adventure in the nature of trade was also confirmed---Addition under S.111 of the Income Tax Ordinance, 2001 was ordered for deletion by accepting the reconciliation of the taxpayer; and penalty was ordered to be modified as a consequence of reduction in income---Taxpayer contended that gain on sale of immovable property was clearly outside the purview of S.37 of the Income Tax Ordinance, 2001 as for the purpose of capital gain from the sale of immovable property had been excluded from the definition of capital asset under S.37(5) of the Income Tax Ordinance, 2001---Validity---First Appellate Authority had rightly upheld the action of Assessing Officer in respect of set off of Association of Persons loss against salary income and income earned from the sale of plot---Charge of penalty on modified/annulled income was not upheld by the Appellate Tribunal---Appeal of taxpayer partly succeeded and departmental appeal was rejected.

I.T.As. Nos.25, 26, 27/KB of 2012 ref.

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

----S.182---Exemption from penalty and default surcharge---Penalty was deleted by the First Appellate Authority by holding that the Taxation Officer had not mentioned the sub-clause under which the addition was made---Validity---Appellate Tribunal held that finding of First Appellate Authority was fair and just calling for no interference---Departmental appeal failed.

I.T.As. Nos.25, 26, 27/KB of 2012 rel.

2010 PTD (Trib.) 1700; 2010 PTD (Trib.) 1733 and 2010 PTD (Trib.) 1709 ref.

Muhammad Aleem for Appellants (in I.T.A. No.87/KB of 2012).

Mumtaz Ali Bohyo, D.R. for Respondents (in I.T.A. No.87/KB of 2012).

Mumtaz Ali Bohyo, D.R. for Appellants (in I.T.As. Nos.22/KB to 24/KB of 2012).

Muhammad Aleem for Respondents (in I.T.As. Nos.22/KB to 24/KB of 2012).

Date of hearing: 20th February, 2013.

2013 P T D 1140

[Appellate Tribunal Inland Revenue (Pakistan) Karachi]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheem-ul-Haq Khan, Accountant Member

Messrs SUI SOUTHERN GAS COMPANY LTD., KARACHI

Versus

ACIR-E, AIT (LTU), KARACHI

I.T.As. Nos. 26/KB, 27/KB and 693/KB of 2011, decided on 20th February, 2013.

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

----Ss.66A & 62---Income Tax Ordinance (XLIX of 2001), S.122(5A)---Powers of Inspecting [Additional Commissioner] to revise Deputy Commissioner's order---Assessment years 1996-97 and 1997-98---Limitation---Order under S.62 of the Income Tax Ordinance, 1979 was passed on 12-11-1998 and limitation expired on 13-11-2002---Proceedings under S.122(5A) of the Income Tax Ordinance, 2001 initiated on 30-9-2002 and 28-10-2002 in respect of assessment years 1996-97 and 1997-98 respectively whereby the department taxed bonus share---Issue of invoking the provision of S.122(5A) of the Income Tax Ordinance, 2001 was subject-matter of appeals references/civil appeals till the Supreme Court of Pakistan decided in favour of taxpayer on 22-6-2009---Subsequently, department initiated proceedings under S.66A of the Income Tax Ordinance, 1979 vide notice dated 15-6-2010 which stood finalized vide order dated 30-6-2010 whereby the Additional Commissioner again taxed the bonus shares---Validity---Order revised under S.66A of the Income Tax Ordinance, 1979 for assessment years 1996-1997 and 1997-1998 were without lawful jurisdiction being bared by limitation and was annulled by the Appellate Tribunal.

C.M. No.11625 and C.A. No.2684 of 2006 dated 22-6-2009, Writ Petition No.1236 of 2010 dated 27-4-2012 and I.T.A. No.613/KB of 2010, dated 24-1-2011 rel.

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

----Ss.2 (f)(vi) & 4---Income Tax Ordinance (XLIX of 2001), S.221---Industrial establishment---Levy of Workers' Welfare Fund was deleted by the First Appellate Authority---Revenue contended that taxpayer was an "Industrial Establishment" and as such charge of Workers' Welfare Fund within the meaning of S.4 of the Workers' Welfare Fund Ordinance, 1979 read with S.221 of the Income Tax Ordinance, 2001 was in accordance with law and such order passed by the Assessing Officer be restored---Taxpayer contended that it was a public limited company incorporated in Pakistan and listed on Stock Exchanges, 60.43% shares of the company were owned by the Government; and was governed by the exclusion provided in S.2(f) of the Workers' Welfare Fund Ordinance, 1971---Provision of exclusion showed that an industrial establishment would not include a concern or establishment which was owned (i) by Government; (ii) by a Corporation established by Government; (iii) by a Corporation the majority of shares of which was owned by the Government; and in view of fact that 60.43% shares were owned by the Government and as such the taxpayer not only fell in the first category number, "by the Government" but also fell in the third category namely "by a corporation the majority of shares of which were owned by the Government"---Validity---Since the taxpayer was a Corporation established by Government and the majority of shares i.e. 60.43% were owned by the Government, which fact had duly been substantiated from the audited accounts for the period under consideration, taxpayer enjoyed exemption in terms of S.2(f)(vi) of the Workers' Welfare Fund Ordinance, 1971, on the ground being corporation established by Government and as well as majority shares held by the Government---Departmental appeals being without any merit were dismissed by the Appellate Tribunal.

2009 PTD 662; Commissioner of Income Tax v. Abdul Ghani PLD 2007 SC 308 = 2007 PTD 967; Commissioner of Income Tax v. National Food Laboratories 1992 SCMR 687 = 1992 PTD 570; I.T.A. No.920/KB of 2011 dated 3-1-2012 and in I.T.A. No.350/KB of 2011 and (2011) 103 Tax 363 (Trib.) rel.

Jawaid Khuram for Appellant (in I.T.As. Nos. 26/KB and 27/KB of 2011).

Badar-ud-Din Qureshi, D.R. for Respondent (in I.T.As. Nos. 26/KB and 27/KB of 2011).

Badar-ud-Din Qureshi, D.R. for Appellant (in I.T.A. No.693/KB of 2011).

Jawaid Khuram for Respondent (in I.T.A. No.693/KB of 2011).

Date of hearing: 20th February, 2013.

2013 P T D (Trib.) 703

[Customs Appellate Tribunal Karachi Bench-II]

Before Ghulam Ahmed Member (Technical-II)

COLLECTOR OF CUSTOMS through Assistant Collector of Customs (Law), Karachi

Versus

Messrs CARE IMPEX, LAHORE

Customs Appeal No.K-666 and 703/II, K-670 to 677/II of 2011, decided on 21st December, 2012.

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

----Ss. 195, 197, 80, 83, 32, 32(3A) & 25---Customs Rules, 2001, R.430 & 442---S.R.O. No. 371(I)/2002 dated 15-6-2002---Powers of Board or Collector of Customs to pass certain orders.---False statement, error, etc.---Fiscal fraud---Clearance of consignment without proper application valuation ruling---Non-application of valuation ruling has resulted in short payment of revenue---First Appellate Authority observed that provision of law contained in S.32, 32(3A) and 195 of the Customs Act, 1969 prescribed different manners of recovery of such short-paid amounts and various officers had been nominated to initiate the recovery proceedings; that particulars of goods had not been mis-declared in any way and the appropriate officers of Customs had properly assessed as well as out-of-charged the goods within the meaning of S.80 of the Customs Act, 1969; and neither the recovery proceedings could be carried out in terms of S.179 and S.32(2) or 32(3) of the Customs Act, 1969 nor under Subsection (3A) of S.32 of the Customs Act, 1969; that the only course of action available with the department was to proceed under S.195 of the Customs Act, 1969 for recovery of the short-paid amount which had been caused by illegal / improper assessments made by the relevant appropriate officers of customs; that officers who adjudicated such cases did not have jurisdiction to do so inasmuch as they had not been empowered under S.195 of the Customs Act, 1969 to reopen the assessments; and that only the Collector could reopen assessments; and orders passed without jurisdiction was a nullity in the eyes of law---Validity---Cases being time barred, could not stand the test of judicial scrutiny on merits---Fact could not be denied that goods were assessed to duty and taxes under S.25 of the Customs Act, 1969 and allowed the release under S.80 of the Customs Act, 1969 as final assessment---Competent authority had exercised powers under S.79 of the Customs Act, 1969 read with Ss.80 and 83 of the Customs Act, 1969, read with Rr.430 and 442 of Sub-chapter III of Chapter XXI of Customs Rules, 2001---Observation made by the First Appellate Authority were well within law and needed no interference---Appeals were dismissed being time barred and without any merit.

S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Custom (Adjudication-1) and others Customs Reference Application No.157 of 2008; PLD 1995 Kar. 687; PLD 1975 SC 331 and PLD 1971 SC 197 ref.

FOP v. Messrs Azhar Brothers Ltd. and PLD 1995 SC 396; Messrs Nida-e-Millat Lahore v. Commissioner Income Tax Zone/Lahore 2008 SCMR 284=2007 PTD 1387; Munir Hussain v. Changaz Khan 2011 SCMR 1424; Amanullah Soomro v. P.I.A. through Managing Director/Chairman and another 2011 SCMR 1341; Messrs Collector of Sals Tax and Central Excise v. Evian Fats and Oil (Pvt.) Ltd. 2007 PTD 141; Collector of Customs MCC of Preventive Karachi v. Sheikh Nasir Ali 2010 PTD 1183; Star Corporation (Pvt.) ltd. Karachi v. Collector of Customs Karachi 2010 PTD 1739; PLD 1953 Dacca 209; 1997 CLC Karachi 1332; 2007 PTD 1337; 2008 PTD 60; 2008 PTD 169; 2008 PTD 981; 2008 PTD 2025; 2008 PTD 60; 2010 PTD 251; PTCL 2010 CL. 12(sic) and 2009 PTD 2004 rel.

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

----Ss.194A & 215---Appeal to the Appellate Tribunal---Limitation---Appeal was barred by time by 74 days---Appellant had not filed any request for condonation of delay at the time of filing of appeal---When Appellate Tribunal pointed out the said deficiency, the appellant filed application for condonation, which were not permissible under the law---Despite the fact that application for condonation was not permissible, appellant failed to advance cogent reasons not filing appeal in time except with plea that the order was misplaced---Plea taken was contrary to provision of Sub-S.(3) of S.194-A and S.215 of the Customs Act, 1969---Relying on loss of order received, loss of record of the case and receipt of the certified copy was not sufficient for enough to be considered a valid argument and that too without fixing the responsibility for lapse---Delay in filing appeal being a technical defect could not wash away the right of appellant---Such plea was not valid as the limitation was provided in the statute specifically and one had to adhere to those---Non-adherence to the mandatory requirement of law is always fatal---Time limitation is mandatory obligation and any order passed in deviation thereof was nullity in law.

FOP v. Messrs Azhar Brothers Ltd. and PLD 1995 SC 396; Messrs Nida-e-Millat Lahore v. Commissioner Income Tax Zone/Lahore 2008 SCMR 284=2007 PTD 1387; Munir Hussain v. Changaz Khan 2011 SCMR 1424; Amanullah Soomro v. P.I.A. through Managing Director/Chairman and another 2011 SCMR 1341; Messrs Collector of Sals Tax and Central Excise v. Evian Fats and Oil (Pvt.) Ltd. 2007 PTD 141; Collector of Customs MCC of Preventive Karachi v. Sheikh Nasir Ali 2010 PTD 1183; Star Corporation (Pvt.) ltd. Karachi v. Collector of Customs Karachi 2010 PTD 1739; PLD 1953 Dacca 209; 1997 CLC Karachi 1332; 2007 PTD 1337; 2008 PTD 60; 2008 PTD 169; 2008 PTD 981; 2008 PTD 2025; 2008 PTD 60; 2010 PTD 251; PTCL 2010 CL. 12(sic) and 2009 PTD 2004 rel.

Ghulam Yasin A.O. for Applicant.

Nadeem Ahmed Mirza Consultant for Respondent.

Date of hearing: 17th December, 2012.

2013 P T D (Trib.) 1913

[Customs Appellate Tribunal Bench-II, Karachi]

Before Ch. Niamatullah Chairman/Member Judicial-I, Muhammad Nadeem Qureshi (Member Judicial-I) and Ghulam Ahmed Member (Technical-II)

Messrs AL-QUTAB ENTERPRISES

Versus

ADDITIONAL COLLECTOR CUSTOMS and another

Customs Appeal No.K-1199 of 2011, decided on 8th July, 2013.

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

----Ss. 193(3), 193-A & 195-B---Constitution of Pakistan. Art. 10---Failure of appellant to deposit duty demanded or penalty imposed---Effect---Language of S. 195-B of Customs Act, 1969 being in affirmative and not negative, thus, would be deemed to be directory and not mandatory---Provision of S. 195-B of Customs Act, 1969 would be read in benefit of appellant---Non-deposit of such duty/ penalty by appellant would not deprive him of right of appeal provided under S.193 of the Act---Decision of appeal on merits despite such failure of appellant would be an act of allowing him a fair trial---Appeal could not be dismissed for such failure of appellant---Principles.

2005 PTD (Trib.) 731; Messrs Bilal Fabric Ltd. and 9 others v. Collector of Customs, Excise and Sales Tax and Hon'ble High Court vide its judgment dated 10-4-1993 Writ Petition No. 1058 of 1993; Messrs Meaple Leaf Cement Factory's case 1993 MLD 1645; PTCL 1993 CL 686(sic); 1993 CLC 1405; S.M. Anwar Sethi v. South British Insurance Company Ltd. PLD 1975 Kar. 458; Barkat Ali v. The State PLD 1973 Kar. 659; Cross on evidence 1967, 3rd Edn., London Butterworth; A Practical Approach to Evidence by Peter Murphy 1988 3rd Edn. London, Black Stone Press Ltd; The Modern Law of evidence by Adrian Kean 1985, Ist Den. Oxford , Professional Books Ltd.; Mst. Safia Begum v. Mst. Malkani and another PLD 1965 Lah. 576; Akber Ali v. Ehsan Ellahi PLD 1980 Lah. 145; Government of Pakistan v. Moulvi Ahmed Saeed 1983 CLC 414; Muhammad Sarwar v. Fazal Rehman 1982 CLC 1286; Sardar Ghulam Nabi Khan v. Azad Government of State of Jammu and Kashmir 1984 CLC 325; Eastern Rice Syndicates v. CBR PLD 1959 SC (Pak) 364; The Collector Central Excise and land Customs v. Imdad Ali 1969 SCMR 708; Messrs Latif Brothers v. Deputy Collector of Customs, Lahore 1992 SCMR 1083; Kamran Industries v. Collector of Customs PLD 1952 FC 19; PLD 1996 Kar. 68; 2011 PTD (Trib.) 2220; PLD 1958 SC 104; 1992 SCMR 1898; 2004 PTD (Trib.) 2898; 2007 PTD 1862; 2008 PTD 60; 2008 PTD 578; 2008 PTD 609; 2008 SCMR 1510; 2008 PTD 2025; 2008 PTD 1539; 2009 PTD (Trib.) 1263; 2009 PTD 1247; 2010 PTD (Trib.) 81; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631 & 2898; PTCL 2009 CL 373 (sic); 2010 PTD 1759; 2010 PTD (Trib.) 2421; 2006 PCr.LJ 1427 = 2006 PTD 2190; 2006 PTD 1207; 2011 PTD (Trib.) 2297; 2002 PTD 976; 2002 SCMR 312; 2009 PTD 1507; 2005 SCMR 492; 1990 SCMR 1072, 1990 SCMR 1059, 1975 SCMR 352, PLD 1995 SC 396, 1998 SCMR 1404, PLD 1997 SC 582, PLD 1997 SC 334; 1997 SCMR 1874; (1957) 32 ITR 89; (1967) 64 ITR 516; 1995 PTD (Trib.) 580; 1995 PTD (Trib.) 1152; (1982) 1381 ITR 742; 1993 PTD 206; 1997 PTD (Trib.) 2209 and PLD 1992 SC 485; 2013 PTD (Trib.) 353; 2002 PTD 700; 2002 PTD 407; 1959 (H.C. of Pak.) 364; 1986 PLC (C.S.) 560; 1980 CLC 2007 and 1986 CLC 746; 1986 CLC 1408; 1993 SCMR 662; 1991 MLD 1243; (1974) 94 ITR 1; (1984) 146 ITR 40; 1986 PTD (Trib.) 119; Qamaruddin v. Province of Sindh 2002 CLC 825; General Medical Store v. Commissioner of Income Tax (2004) 136 Taxman 412; Shah Moorad Sugar Mills Ltd., v. Additional Collector Sales Tax (Quetta), Hyderabad and others 2005 PTD 2417; 2006 PTD (Trib.) 62, Dr. Zafar Haider v. Income Tax Tribunal and 2 others 2008 PTD 1940 ref.

PLD 1972 SC 326; Niaz Muhammad Khan v. Mian Fazal Rakib PLD 1974 SC 134; 1993 MLD 1645; 1993 CLC 1405; 2005 PTD (Trib.) 731; 1991 PTD 551; 2006 PCr.LJ 1427 = 2006 PTD 2190; (1957) 32 ITR 89; (1967) 64 ITR 516; 1995 PTD (Trib.) 580, (1995) PTD (Trib.) 1152, (1982) 1381 ITR 742, 1993 PTD 206,1997 PTD (Trib.) 2209; PLD 1992 SC 485 and 2013 PTD (Trib.) 353 rel.

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

----Ss. 79, 80 & 131---Customs Rules, 2001, Rr. 107, 109, 110, 433, 437, 438, 442, 444, 450, 452 & 556---Obtaining clearance of containerized goods through MCC of PaCCS Mechanism stated.

PLD 1996 Kar. 68 and 2012 PTD 428 ref.

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

----S. 32---Expression "knowing or having reason to believe" as used in S.32 of Customs Act, 1969---Connotation stated.

The untrue and false statement attracting the mischief of provisions of S. 32 of Customs Act, 1969 has to be made by the importer/exporter and by the clearing agent or by any person submitting document with the customs in connection with any matter of customs "knowing or having reasons to believe". The provision of section 32 contemplates the existence of a personal "knowledge". Believe being a conviction of the mind arising not from actual perception or knowledge, but by way of inference of evidence received or information derived from others. It falls short of any absolute certainty, because the accused in accounting for his possession may be able to show that the ground upon which is based are unsubstantial.

2011 PTD (Trib.) 2220 and Fazal Kader Chowdri v. Crown PLD 1952 FC 19 rel.

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

----Ss. 32, 32-A & 79---Customs Rules, 2001, Rr. 433---Allegations of violation of Ss. 32 & 32-A, Customs Act, 1969---Levelling of such allegations on importer in absence of goods declaration or statement or electronical information---Scope---Provision of S. 32 of Customs Act, 1969 would not apply to such case as importer had neither submitted document or goods declaration electronically nor given information electronically---Principles.

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

----S. 32-A---Show-cause notice, issuance of---Limitation---Date of detection being in year 2007 or first quarter of 2008---Show-cause notice issued in October, 2010---Validity---Neither show cause could be issued nor recovery proceedings be initiated after expiry of stipulated period---Impugned show cause notice was barred by time in circumstances.

S.T.A. 274 of 2005 Sattar Brothers v. Collector of Customs (Appeals), Hyderabad and others; S.T.A. 179 of 2006 Dadabuoy Sack Ltd. v. The Collector of Customs, Sales Tax and Federal Excise (Appeals) Hyderabad and others 2009 PTD (Trib.) 500; Shah Murad Sugar Mills and others's case 2007 PTD 117; Messrs Ghandhara Nissan Diesel Ltd. v. The Collector of Customs, Karachi 2005 PTD 2453; PSIC Cutlery, Wazirabad v. Collector of Sales Tax and Central Excise, Gujranwala and others 2008 PTD 981; Joyla Sadat Cotton Industries v. Collector of Customs 1992 SCMR 1898; Federation of Pakistan v. Messrs Ebrahim Textile Mils Ltd. and others 2006 PTD 537; Collector of Customs, Sales Tax (West) Karachi, v. K&A Industries, Karachi, 2007 PTD 1862; 2008 PTD 60; 2008 PTD 578; 2008 PTD 609; 2008 SCMR 1510; 2008 PTD 2025; 2008 PTD 1539; 2009 PTD (Trib.) 1263; 2009 PTD 1247; 2010 PTD (Trib.) 81; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631 and 2898; PTCL 2009 CL 373(sic); 2010 PTD 1759; 2010 PTD (Trib.) 2421 and 2011 PTD (Trib.) 2220 rel.

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

----S. 193(3)---Order-in-appeal, passing of---Delay of 59 days---Appeal filed on 28-2-2011, while order-in-appeal required to be passed within 120 days of its filing i.e. by 28-6-2011 or within further extended period of 60 days prior to expiry of 120 days---Extension granted on 27-8-2011 on ground of non-finalization of matter within stipulated period due to availing of adjournments by both parties---Validity---Time extension in such cases would be akin to giving a new lease of life into dead body and would tantamount to flogging a dead horse---Event or document, if became dead on account of non-timely extension of time period, would be considered and new spirit could not be infused therein---Record showed that parties had not sought any adjournment---Appellate Authority could not extend time without serving notice upon appellant---Impugned extension was unlawful and without jurisdiction as same had been granted after expiry of initial period of 120 days---Order-in-Appeal being barred by 59 days was, without jurisdiction and void ab initio.

2004 PTD 369, 1998 MLD 650, 2005 PTD 23, 2003 PTD 2821, 2004 PTD (Trib.) 2898 , 2007 PTD 2092, 2010 PTD (Trib.) 1636, 2010 PTD (Trib.) 2117, 2011 PTD (Trib.) 79, 2011 PTD (Trib.) 987, 2011 PTD (Trib.) 1010, 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 ref.

2007 PTD 117; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and another 2008 PTD 60; Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; 2007 PTD 2092; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117; 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 (Trib.) 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 rel.

(g) Jurisdiction---

----Exercise of jurisdiction by an Authority/Court/Tribunal---Scope---Such jurisdiction, if made subject to existence of a specific condition, could not be exercised in absence of such condition.

Nadeem Ahmed Mirza for Appellant.

Ghulam Yasin (P.A.) Present for Coll MCC PaCCS Karachi and Rana Gulzar Ahmed (S.Investigating Officer) for the Respondents.

Date of hearing: 25th June, 2013.

2013 P T D (Trib.) 1971

[Customs Appellate Tribunal Bench-II, Karachi]

Before Ch. Naimatullah Chairman/Member Judicial-I and Ghulam Ahmed, Member Technical-II

Messrs BENCH MARK COMMODITIES

Versus

ASSISTANT COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-167 of 2013, decided on 1st July, 2013.

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

----S. 24-A---Order of Court/Tribunal/Authority---Essentials ingredients stated.

Orders which did not contain rebuttle on the ground advanced and decision/judgments relief upon by appellant and also not containing substantial reasons 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 is 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, it becme perverse and a perverse finding of fact, which is violative of the established principle of appreciation of evidence on record was not sustainable in law. The principle that every judicial or quasi-judicial finding should be based on reasons containing the justification for the finding in the order itself is an established principle of dispensation of justice.

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; 2003 PTD 2369; PLD 1995 SC (Pak) 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 rel.

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

----S. 180---Adjudication proceedings---Dispensing with requirement of issuing show-cause notice to assessee at his request for summary adjudication---Scope---Object of issuing such notice being to enable assessee to know about charges levelled against him, applicable contravened provisions of law and attracted penal clauses----Adjudication Officer could not ignore mandatory requirement of issuing such notice prior to proceedings for adjudication either properly or summarily---Principles.

PLD 1976 SC 37; 2001 SCMR 838; PLD 1964 SC 536; 2003 SCMR 1505; 2006 SCMR 129; 2006 PTD 978; 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; Zakir Ahmed's case PLD 1965 SC 90; Pakistan Crome Mines' case 1983 SCMR 1208 and Pakistan's case PLD 1987 SC 304 ref.

2004 PTD (Trib.) 1324; 2001 SCMR 838 and 2006 PTD 978 rel.

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

----S. 206---Corregendum issued by Appellate Authority to replace an existing para of its order with fresh para---Validity---Such change would not fall withim ambit of "clerical or arithmetical error"---Corrigendum in question for being impermissible under law would be of no legal effect---Principles.

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

----S. 193(3)---Order-in-appeal, passing of---Delay of 10 days---Appeal filed on 3-9-2012, while order-in-appeal required to be passed within 120 days of its filing i.e. by 1-1-2013 or within further extended period of 60 days prior to expiry of 120 days---Appellate Authority instead of opting to extend such period issued corrigendum dated 9-1-2013 replacing its order dated 1-1-2013 to 9-1-2013---Validity---Date 1-1-2013 would be considered for calculation of limitation---Order-in-Appeal for being barred by 10 days was without jurisdiction and void ab initio.

1998 MLD 650; (sic) ?? SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2004 PTD 369; 2004 PTD (Trib.) 2898; 2005 PTD 23; 2003 PTD 2821; 2007 PTD 2092; 2008 PTD 60; 2008 PTD 578; 2009 PTD (Trib.) 1263; 2009 PTD 762; 2009 PTD (Trib.) 107; 2009 PGD 1978; 2010 PTD 465; 2011 PTD 235; 2011 PTD 1185; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 79; 2012 PTD (Trib.) 1650 and 2012 PTD 980 ref.

2007 PTD 117; 2008 PTD 60; 2007 PTD 2092; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117; 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 (Trib.) 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 rel.

Nadeem Ahmed Mirza for Appellant.

Irfan Burni (A.O.) for Respondent.

Date of hearing: 2nd April, 2013.

2013 P T D (Trib.) 2320

[Customs Appellate Tribunal Bench-II, Karachi]

Before Ghulam Ahmed, Member Technical-II

ABDUL RAZZAQ

Versus

DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-FBR and 2 others

Customs Appeal No.K-470 of 2011, decided on 13th August, 2013.

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

----Ss.2(s), 156 (1) (8) (9), 179, 180, 187 & 194-A---Qanun-e-Shahadat (10 of 1984), Art.117 & 121---Appeal to Appellate Tribunal--- Confiscation of smuggled goods---Burden of proof---Scope---Customs Authorities raided the godown acquired by the appellant and recovered smuggled foreign origin ladies art silk cloth having marks of "in transit to Afghanistan via Karachi"---Customs authorities asked the appellant to produce legal import documents in support of lawful possession of the recovered goods but he failed to produce the same, consequently the recovered goods were seized and the appellant was issued show-cause notice---Appellant took the stance that he had purchased the recovered ladies art silk cloth from open market without the cover of legal import documents and as such the same could not be treated as smuggled goods---Validity---Appellant right from the stage of detention/seizure and adjudication proceedings failed to place on record the purchase receipt in support of his contention that he had purchased the goods in question from open market---Appellant had also taken the plea that he had neither been given nor he had obtained any cash memo or bill from the seller of the goods---Charge levelled in the show-cause notice had established against him by virtue of the fact that he had failed to discharge burden of proof laid upon him---Appeal was dismissed.

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

----Ss.2(s), 156 (1) (8) (9), 179 & 180---Smuggled goods---Confiscation of goods not importable in Pakistan---Show-cause notice---Powers of customs authorities to seize restricted items---Scope---Customs authorities detained art silk fabric which could not be imported in Pakistan as per the provisions of Import Policy Order 2010-2011---Customs authorities raided at the godown acquired by the appellant and recovered smuggled foreign origin ladies art silk cloth having marks of "in transit to Afghanistan via Karachi"---Contention of the appellant was that he had purchased the recovered ladies art silk cloth from open market and as such the same could not be treated as "smuggled" goods---Validity---Goods meant for 'transit to Afghanistan' were pilferaged in Pakistan either by importer or the appellant himself---Plea taken by the appellant that he bought the goods from open market could not be sustainable in circumstances---Respondent/Customs Authorities were authorized to adjudicate such type of cases and in exercise of which they issued show-cause notice---Appeal was dismissed.

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

----Ss.2(s), 156 (1) (8) (9), 179 & 180---Smuggled goods---Items alleged to be smuggled were freely available in the open market---Customs authorities recovered the banned/restricted items from the custody of appellant and confiscated them by treating the same as "smuggled goods"---Appellant had taken the plea that goods in question were freely available in open market and could not be termed as smuggled---Validity---Goods should be from the list of freely importable items and not falling under the restricted/banned regime of Import Policy Order---If freely importable goods were detained/seized, such goods were deemed to be duty paid---Goods in question were neither allowed to be imported free of any restriction nor the goods meant for "in transit to Afghanistan via Karachi" could be termed through any stretch of imagination that these were freely available in the market---Appeal was dismissed.

Ms. Sikandar A. Karim v. The State 1995 SCMR 387; Assistant Collector v. Ms. Qazi Ziauddin PLD 1962 SC 440 and Ms. Muhammad Saeed v. Collector of Customs 2005 PTD 1813 distinguished.

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

----Ss.2(s), 9 & 10---Smuggled goods---Goods brought to Pakistan other than a route declared under Customs Act, 1969---Powers of the Customs Authorities to intercept or detain goods brought into Pakistan other than a declared route---Scope---Detained goods were specifically notified by the Federal government to be termed as "smuggled"---Goods in question were brought into Pakistan via route other than the one declared in S.9 or S.10 of the Customs Act, 1969 or from a place other than a Customs-Station---Such goods could be either intercepted or detained for the purpose of preventing smuggling, levy of duty and taxes, penalizing.

PLD 1975 Kar. 482; PLD 1978 Kar. 774; 1981 PCr.LJ 66; 1981 PCr.LJ 986; 1984 PCr.LJ 3096(2); 1987 PCr.LJ 325 and 1988 PCr.LJ 435 rel.

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

----Ss. 179(3), 193-A(3) & 194-A---Appeal before Appellate Tribunal---Smuggled goods---Order of confiscation of goods was time-barred---Scope---Customs Authorities detained the smuggled goods from the possession of appellant---Appellant challenged the order of Customs authorities being time-barred before Collector of Customs (Appeals)---Collector (Appeals) dismissed the appeal of the appellant---Contention of the appellant was that order in original passed by the Customs Authorities and order in appeal passed by Collector Customs (Appeals) was time barred---Validity---Appellant was found involved in smuggling of the goods or if not the purchase of smuggled goods and his act was an unlawful act---While indulging in unlawful activity with the intention of evading payment of duty and taxes wilfully and consciously, the appellant was not entitled to take shelter behind the plea that the orders were time barred---Party seeking equity must have equities in his favour---No one could be allowed to take advantage of its wrong act or fraud played by him under the blanket of the provision of the Customs Act, 1969---Appellant was legally stopped from challenging validity of the order-in-original/appeal---Appellant had not approached the Appellate Tribunal with clean hands and was not entitled for any relief---Appeal was dismissed.

West Pakistan Tanks Terminal (Pvt.) Ltd. v. Collector of Customs Appraisement Karachi 2007 SCMR 1318 rel.

(f) Administration of justice---

----One who seeks equity must have equity in his favour.

Ms. Muhammad Ateeq Paracha's case 2005 PTD (Trib.) 135; Ms. Kamran Industries's case PLD 1996 Kar. 68; 1996 PTD 579; Collector v. Ms. Rahm Din's case 1987 SCMR 1840; Messrs Super Asia Muhammad Din Sons's case 2008 PTD 60; Messrs Syed Bhai Lighting Ltd. Lahore v. Collector 2009 PTD (Trib.) 1263; Messrs A K. International v. Secretary Revenue 2007 PTD 1337; Messrs Ford and Lord v. Deputy Collector, Preventive Order No. 3056 of 2009; Messrs Tariq Irshad v. The State, PLD 2006 Kar. 25; Messrs Atta Muhammad Qureshi v. Settlement Commissioner PLD 1971 SC 61; Ms. Walayat Ali Mir v. P.I.A. Corporation 1995 SCMR 650; Messrs Nadeem Textile Mils Ltd.'s case 2002 PTD 3087; Adamjee Jute Mills Ltd. v. The Province of East Pakistan, PLD 1959 SC 2721; Gowanea Mohan Sikdar v. Controller Import and Export PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan PLD 1970 SC 173 and Ms. Muhammad Ibrahim Khan v. Ministry of Labor 1984 SCMR 1014 ref.

Sardar Faisal Zafar for Appellant.

Shabih Hyder for Respondents.

Date of hearing: 18th June, 2013.

2013 P T D (Trib.) 1809

[Customs Appellate Tribunal Bench-II]

Before Ch. Niamatullah Chairman Member (Judicial-I) and Ghulam Ahmed Member (Technical-II)

Messrs DELTA AUTOMOBILES and another

Versus

ADDITIONAL COLLECTOR OF CUSTOMS

Customs Appeal No.K-653 of 2009, decided on 12th June, 2013.

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

----S.194A---Appeal to the Appellate Tribunal---Remand order---Revival of order by the original Adjudicating Authority already set aside by the Appellate Tribunal---Validity---Operating para of the order-in-original in compliance to the directions of Appellate Tribunal's order did not answer the queries posed by it---Adjudicating Authority without application of mind fairly inked that he did not find any cogent reasons to alter the order-in-original and revive it by putting life into a dead body---Order had been based by reviving an order which had lost its validity was in itself a nullity in law and was a void order---Answer to question "whether upholding of an order which had already been set aside by the Appellate Tribunal could be revived by the original Adjudicating Authority to whom it was remanded to decide a fresh" was answered in the negative.

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

----Ss.80, 81, 84, 86, 56, 109, 193 & 195---Checking of goods declaration by the customs---Valuation---Value of goods loaded up and allowed in bonding after assessment under S.80 of the Customs Act, 1969---Re-assessment of goods after clearance from bond under S.109 of the Customs Act, 1969---Validity---Goods had been examined under first appraisement system after physical examination and taking up the declared value by the shed staff and Deputy Collector, and allowed removal for into bond under S.84 of the Customs Act, 1969---Department contended that goods were not assessed under S.80 of the Customs Act, 1969 as there was a remark on face of goods declaration that "into bond allowed subject to check value aspect at the time of ex-bonding"---Nothing else was indicated which could bring forth the fact with evidence that the goods had been assessed provisionally under S.81 of the Customs Act, 1969---Various sections of Chapter XI of Customs Act, 1969 dealt exclusively with warehousing and provide detail procedure in such circumstances---Department had failed to prove that any guarantee or other instruments had been taken from the importer under S.56 of the Customs Act, 1969---Goods assessed under S.80 of the Customs Act, 1969 for the in-bonding could not be subjected to redetermination check of value unless specifically allowed under S.81 of the Customs Act, 1969---Only one section was available in the chapter XI of Customs Act, 1969 which dealt with re-assessment but restricted itself to the rate of duty and that was S.109 of the Customs Act, 1969---Things had to be done in the same manner and the same way as prescribed under the law and no other way---Imported goods allowed release for into bond had to either assessed under S.80 or S.81 of the Customs Act, 1969 at the initial stage of their import when goods declaration was filed---Merely putting remarks that "valuation check to be made at the time of export" was neither legal nor provided under the law, as to allow an open cheque for an indefinite period---Valuation dispute had been made after release of goods from the bonded warehouse making it thus a close transaction and during the time till release was in custody of the Department---Question as to "whether impugned goods which had been examined under first appraisement and value loaded up by the Deputy Collector and allowed in bonding after assessment under S.80 of the Customs Act, 1969 could be put to re-assessment well after clearance from the bond under S.109 of the Customs Act, 1969" was answered in the negative.

??????????? Messrs Pfizer Laboratories v. Federation of Pakistan and others PLD 1998 SC 358; Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills 2007 PTD 1804 and Supreme Court order dated 10-11-2003 case No.775-K of 2003 ref.

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

----Ss.32, 30 & 25---Customs Rules, 2001, R.107---False statement, error, etc.---Goods in custody of the Department for clearance---Invocation of provision of S.32 of the Customs Act, 1969---Validity---Goods had been examined at length under first appraisement system and allowed for in-bonding which was evident from the examination report on the goods declaration filed by the importer---In spite of point of jurisdiction, charge levelled against the importer with reference to S.32 of the Customs Act, 1969 had legal infirmities---In addition to declaration any communication, or answers to questions, put by customs officers and found wrong in material terms, constituted an offence within the framework of the S.32 of the Customs Act, 1969---In order to bring an act, or action within the framework of the word 'false', as used in S.32 of the Customs Act, 1969, the act should either be a conscious wrong, or culpable negligence and should be untrue either knowingly or negligently---Two questions needed to be addressed before invoking S.32 of the Customs Act, 1969, for mis-declaration (a) whether mens rea which was essential element for the purpose of subsection (1) of S.32 of the Customs Act, 1969 had been proved and (b) whether a demand for short recovery could be made under the provisions of subsection (2) of S.32 of the Customs Act, 1969, without proving any guilty intention, knowledge, or mens rea on the part of the maker of the statement---If element of mens rea was not visible and guilty intention was not proved then provisions of S.32 of the Customs Act, 1969 could not be invoked---Charge of mis-declaration under S.32 of the Customs Act, 1969, could not be invoked---Question as to "whether the provisions of S.32 of the Customs Act, 1969 could be invoked when the impugned goods till its clearance had been in custody of the Department" was answered in the negative by the Appellate Tribunal.

??????????? Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053; Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133; Union Sport Playing Cards Co. v. Collector 2002 YLR 2651, Apl-Hamd Edible Oil Limited v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Limited v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630;? State Cement Corporation v. G.O.P. C.A. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 rel.

??????????? Junaid Ghaffar for Appellant.

??????????? M. Farooque Khan? for Respondent.

??????????? Date of? hearing: 13th March, 2013.

2013 P T D (Trib.) 2186

[Customs Appellate Tribunal, Bench-II]

Before Ghulam Ahmed, Member (Technical-II) and Adnan Ahmed, Member (Judicial-II)

Messrs NOVO NORDISK PHARMA (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, ADJUDICATION-II, KARACHI MCC PaCCS

Customs Appeal No.K-395 of 2013, decided on 15th July, 2013.

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

----Ss. 32, 32A, 79, 80, 156(1), 179 & 181---S.R.O. 499(I)/2009 dated 13-6-2009---Allegation of misdeclaration of value of imported goods---Offer/option given to importer to redeem consficated goods on payment of all leviable duty and taxes as well as fine equal to customs value thereof---Validity---Redemption fine would be worked out with reference to duty and taxes attempted to be evaded and not on duty and taxes leviable on whole consignment---Federal Board of Revenue in case of Ss. 32 & 32-A of Customs Act, 1969 had no power to issue notification with fixation of pitch of fine under S. 181 thereof---Adjudicating Authority had discretion to impose fine---Fixation of redemption fine on goods or class of goods by Federal Board of Revenue through S.R.O. 499(I)/2009, dated 13-6-2009 was against S.181 of Customs Act, 1969 and without lawful authority---Custom value of goods for fine would be taken as given in S. 179 of the Act---Tribunal modified impugned redemption fine and fixed the same at 35% of evaded duty and taxes.

2004 SCMR 456 ref.

Messrs Weave and Knit (Pvt.) Ltd. Karachi v. Additional Collector of Customs 2004 PTD 2981; Superior Textile Mills Ltd. v. FOP 2000 PTD 399; (Adjudication) Karachi Collector of Sales Tax and others v. Superior Textile Mills Ltd. and others PLD 2001 SC 600 and Saleem Raza v. FOP and others 2012 PTD 302 rel.

(b) Notification---

----Notification would be read in harmonious manner.

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

----S. 156(1)---Penalty, imposition of---Factors essential to be considered by Adjudicating Authority stated.

Prior to imposing penalty, the Adjudicating Authority has to take into consideration the profile of the importer and his line of business and the relevant clause of the provision of section 156(1) of the Customs Act, 1969. Indeed the clauses of section 156(1) defined the pitch of penalty and other actions, but none of the clauses is mandatory in nature, it is left to the discretion of the Adjudicating Authority and the Court to impose the penalty defined therein to the extent of "he" or "it" feel appropriate. The Adjudicating Authority is also empowered to let free the person/company with a warning.

The pitch of penalty has to correspond with the gravity of the offence of importer.

Ms. Ismat Mehdi for Appellant.

Ghulam Yasin, P.A. for Respondent.

Date of hearing: 31st May, 2013.

2013 P T D (Trib.) 1636

[Customs Appellate Tribunal Bench-II, Karachi]

Before Adnan Ahmed, Member Judicial-II and Ghulam Ahmed, Member Technical-II

Messrs MUHAMMAD KAMRAN

Versus

ADDITIONAL COLLECTOR, COLLECTORATE OF CUSTOMS ADJUDICATION-I and another

Custom Appeal No.K-337 of 2013, decided on 29th May, 2013.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 162, 163, 168, 156(1) Cls.(8), (9), (89), (90), 157(2), 171 & 215---Criminal Procedure Coed (V of 1898), S.103---General Clauses Act (X of 1897), S.24-A---Smuggling---Foreign Origin contraband Whisky and other goods---Confiscation---Appellant contended that locally manufactured goods were seized and detained without any legal reason; that there was no law to seize or confiscate locally manufactured goods; that goods loaded on truck were seized within the country as such these goods could not be treated as smuggled goods; that the notice was not issued in the names of Miscellaneous Goods owners although the names of the owners of Miscellaneous Goods were provided in shape of bilties to the seizing agency but even then no notice was served upon the owners of such goods which was mandatory; that seizure of local goods was not discussed in the order and discussed only smuggled and non-duty paid goods whereas more than 50% consignments consisted of local goods; that fine and penalty had been imposed on the owner of Truck but there was nothing about the existence of Liquor in the truck; that the liquor found from the truck was not loaded on the Truck by the transport company; and that person arrested and produced before the Court were outsiders and they had accepted their guilt before the Special Customs Court and Transport Company was not found involved in the transport of liquor as the same was not booked and no billty Number was assigned---Validity---Department was unable to show acknowledgement receipts of service of Show Cause Notice---Name of appellant was mentioned in the Show Cause Notice as well as in the order-in-original---Locus standi of the appellant stood established inasmuch as the fact that the case had been adjudicated without giving them the opportunity of being heard---Admittedly and evidently Show Cause Notice were not served on the transport company as well as the owners of Miscellaneous goods and Adjudicating Officer had not provided the opportunity of hearing to the Transport company and all the owners of Miscellaneous goods, the whole proceedings were not covered under the law---Further, the adjudicating authority had not discussed about the liquor which had been the core point in the Show Cause Notice whereas the goods which as per inventory had been manufactured locally being part of the offending goods had been confiscated without giving any reason---Adjudicating Officer did not impose fine and penalty on driver of the Truck for liquor who had pleaded guilty before Special Judge Customs and was punished---Order-in-original was patently not a speaking order and was not properly worded---Locally manufactured goods and imported goods purchased from the local markets were allowed to be released and their confiscation was unlawful and without any valid reason---Value of conveyance and container was reduced---Redemption fine equivalent to 20% of the value of trailer/truck with a penalty imposed by the Adjudicating Officer on the owner of vehicle was upheld---Order was modified accordingly.

Muhabbat Hussain Awan and Ms. Surraya for Appellants.

Saeed Ashraf, P.O., and Fareedullah, SPO for Respondents.

Date of hearing: 24th May, 2013.

2013 P T D (Trib.) 2067

[Customs Appellate Tribunal Karachi Bench-III]

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

Messrs UNITED AUTO INDUSTRIES (PVT.) LTD. through Manager

Versus

DIRECTOR GENERAL CUSTOMS and 2 others

Customs Appeal No.K-665 of 2012, decided on 16th May, 2013.

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

----S. 25---Valuation Ruling issued illegally by Director General Valuation---Effect---No limitation would run against such Ruling.

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

----Ss. 25 & 25-A(4) [as amended by Finance Act (XVI of 2010)]---Customs Rules, 2001, R. 107---Valuation Rulings, issuance of---Limitation---Valuation Ruling under S. 25 of Customs Act, 1969 could not be issued after years of import---Valuation Ruling issued under S.25-A of Customs Act, 1969 would be applicable upto 90 days from date of its issuance---Person aggrieved by Valuation Ruling issued under S.25-A(4) of the Act could approach Director General Valuation for its revision or rescission after expiry of 90 days---Principles.

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

----Ss. 25 & 25-A---General Clauses Act (X of 1897), S. 24-A---Determination of Customs Value of imported goods---Provisions of Ss.25 & 25-A of Customs Act, 1969---Applicability---Scope.

Section 25-A, Customs Act, 1969 is only an enabling section; it permits, but does not mandatorily require a predetermination of customs value. The principle method of determining customs value is and must remain section 25. Section 25-A is not intended to be a substitute for section 25 nor can it be resorted to in such manner and with such frequency that it marginalizes the later provision. It is merely an adjunct to section 25 to be resorted to in appropriate circumstances and for an appropriate period. In enacting section 25-A, the legislative intent was not to create a statutory bypass to the Valuation Agreement. Issuance of valuation ruling under section 25-A cannot be regarded as limited only to those cases where the department concludes that there is group under-invoicing, the section also cannot be used for wholesale determination of customs values. Such an approach would, in effect, transform the "determination" permissible under section 25-A to an impermissible "fixation" of value. This is an important point which must be keep in mind and may be relevant in appropriate cases when considering the vires of a Valuing Ruling.

The Valuation Ruling must be determined using one of the methods of section 25 of the Act and valuation agreement at least three of those methods, the identical goods method, the similar goods method and the detective value method, required the value to be determined "as or about the same time" as the goods being valued.

The determination of value under section 25-A of the Act is not a simple thing, it is, therefore, appropriate that the ruling should contain sufficient detail to show that section 25-A has been properly applied and also makes it necessary that the Valuation Ruling should be a speaking order as per the mandatory requirement of section 24-A of the General Clauses Act, 1897.

Messrs Zymotic Diagnostic International C.P. No.434-K of 2005 fol.

Mian Abdul Ghaffar for Appellant.

Shamim Ahmed, P.A. for Respondents.

Date of hearing: 13th March, 2013.

2013 P T D (Trib.) 2202

[Customs Appellate Tribunal Bench-III, Karachi]

Before Ch. Naimatullah, Chairman/Member (Judicial-I), Ghulam Ahmed, Member (Technical-II) and Muhammad Nadeem Qureshi, Member (Judicial-I)

MUHAMMAD NAEEM QURESHI

Versus

COLLECTOR OF CUSTOMS, COLLECTORATE and another

Customs Appeal No.K-930 of 2010, decided on 5th July, 2013.

Customs Act (IV of 1969)---

----S. 194-A---Appeal to Appellate Tribunal signed/filed by father instead of his son (appellant) confined in Jail---Dismissal of Appeal by Appellate Tribunal for being incompetent---Validity---Provision of S.194-A of Customs Act, 1969 being mandatory in nature, appeal could only be filed by a person aggrieved by order passed against him, but none else---Father in absence of any authority had no locus standi to file appeal on behalf of his son---Counsel in order to cover defect of locus standi was bound to get appeal signed by appellant upon his release from prison, but he failed to do so---Father of appellant was not an aggrieved party, thus, appeal was not maintainable for being signed, verified and filed by an un-authorised person.

2011 CLD 408 and 2006 SCMR 129 rel.

Ms. Kausar Fatima for Appellant.

Ghulam Yasin (P.A.) for the State.

Rana Gulzar Ahmed (SIO) for Respondents.

Date of hearing: 25th June, 2013.

2013 P T D (Trib.) 2250

[Customs Appellate Tribunal, Bench-III, Karachi]

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

Messrs AYOUB INTERNATIONAL, KARACHI

Versus

COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.K-124 of 2012, decided on 14th June, 2012.

Customs Act (IV of 1969)---

----S.194-B(1)---Orders of Appellate Tribunal---Stay application---Principle of mutatis mutandis---Appellant contended that during the hierarchy of customs before the Additional Collector of Customs as well as the First Appellate Authority, the subject matter pertaining legal and factual controversy were not to be taken up in accordance with the law and that the case was decided arbitrarily without applying judicious mind only on the principle of mutatis mutandis and disposed of the matter without discussing the factual as well as legal controversies---Validity---Customs authorities were required to pass separate orders in each case and the litigant had a right to contest their case, which should be disposed of on its legal and factual positions separately---Application of principle of mutatis mutandis was depricated---Action taken by the Department against the appellant in the subject pending appeal was violative of S.194-B(1) of the Customs Act, 1969---Appellant had established the prima-facie case, balance of convenience was also in favour of appellant which should also cause irrecoverable loss to the appellant---Appellate Tribunal directed that department should not take any coercive action against the appellant till the next date of hearing.

Afzal Awan for Appellant.

Ghulam Yasin for Respondent No.2.

Date of hearing: 14th June, 2012.

2013 P T D (Trib.) 1996

[Customs Appellate Tribunal Bench-I]

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

Messrs MUHAMMAD RAMZAN, SEWING MACHINE AND SILK YARN

Versus

COLLECTOR MODEL CUSTOMS COLLECTOR, (PaCCS) and another

Customs Appeal No.K-279 of 2013, decided on 17th June, 2013.

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

----Ss. 25, 79(1) & 81---Mis-declaration of origin and value of imported goods---Goods declared of China origin alleged by Authority to be of Japan origin requiring assessment at higher values as compared to China origin---Order-in-original enhancing declared value of goods upheld by Appellate Authority---Validity---No data or evidence available on record in support of impugned enhancement of value made without any reason---Importer by producing Bill of Lading, certificate of origin issued through combined declaration under FTA packing list, commercial invoice as evidence had proved subject goods to have been imported from China---Alleged offence could not be attributed to importer in absence of element of mens rea caused by him---Declaration/statement made by an importer under bona fide belief or in presence of any department practice or interpretation in vogue or view held by departmental officers would not be mis-declaration in terms of S. 32(1) of Customs Act, 1969---Tribunal set aside impugned orders and show cause notice for being arbitrary and suffering from inherent legal infirmities.

Lt. General (Retd) Shah Rafi Alam v. Lahore Race Club, PLJ 2003 Lah. 1660; Khalid Qureshi v. UBL 2001 SCMR 103; East West Steamship v. Queen Land Insurance PLD 1963 SC 663; Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517; Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587; Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485; Central Insurance v. CBR 1993 SCMR 1232 and Messrs Muller and Phipps Pakistan (Pvt.) Ltd. v. The Collector of Sales Tax Enforcement LTU, Karachi 2010 PTD (Trib.) 1787 ref.

PTCL 2008 CL 203 rel.

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

----S. 32(1)---Declaration of goods made under bona fide belief or in presence of departmental practice or interpretation in vogue---Effect stated.

Statement or declaration made under bona fide belief or in presence of any departmental practice or interpretation vogue or view held by the departmental officers shall not be a mis-declaration within the contemplation of subsection (1) of section 32 of the Customs, 1969. The matter of interpretation is also not a matter of mis-declaration.

(c) Public functionaries---

----Duty and obligation of public functionaries would be to redress grievance of citizens without fear, favour and nepotism.

Zahid Akhtar's case PLD 1995 SC 530 rel.

Mohabbat Hussain Awan for Appellant.

Ghulam Yasin, A.O., for Respondents.

Date of hearing: 2nd April, 2013.

2013 P T D 1690

[Customs, Appellate Tribunal, Islamabad]

Before Ghulam Ahmad Member (Technical) and Muhammad Akhtar Awan, Member (Judicial)

Messrs VENUS PAKISTAN (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR DTRE, AFU, B.B.I., AIRPORT and 2 others

Appeals Nos. 13 and 14/CU/IB of 2012, decided on 24h June, 2013.

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

----Ss. 18 & 209---Customs Rules, 2001, Rr. 307-A & 566---Afghan Transit Trade Agreement, 2010, Art. 28---Petroleum products acquired by exporter under DTRE approval not consumed in export due to its loss during transit to Afghanistan---Show cause notice issued to Bonded Carrier of such goods by, authorities demanding damages as well as duties and taxes in terms of R. 566 of Customs Rules, 2001---Order-in-Original passed against Carrier upheld by Appellate Authority---Validity---Liability to pay duties and taxes under law would be that of DTRE holder as importer of crude oil and exporter of finished goods to Afghanistan through licensed Bonded Carrier---Relationship of DTRE holder and Bonded Carrier would be that of Principal and Agent---Carrier as agent would be liable to pay duty only for wilful commission of wrong as provided under S. 209(3) of Customs Act, 1969---Such goods had not been removed from Bond for home consumption without payment of duty or put to home consumption, but had been destroyed during transit to Afghanistan due to terrorist act being an unavoidable accident---Loss of such goods by terrorist attack had been reported to Police, consignor, DTRE office and Customs Officers at border---Customs Act, 1969 did not require recovery of duty and taxes on goods proved to have been destroyed in unavoidable accidents---When Principal as importer or exporter could not be held liable, then recovery of duties and taxes from Bonded Carrier could not be allowed---Impugned show-cause notice was bad in law due to non-joinder of DTRE holder---Tribunal accepted appeal and set aside impugned orders---Principles.

(b) Words and phrases---

----"Unavoidable accident"---Definition.

2002 PTD 804 ref.

(c) Words and phrases---

----"Unavoidable cause"---Definition.

2002 PTD 804 ref.

Isaac Ali Qazi for Appellant.

Bilal Afzal for Respondents.

Date of hearing: 21st May, 2013.

2013 P T D (Trib.) 2284

[Customs Appellate Tribunal Bench-I, Islamabad]

Before Ch. Naimatullah, Chairman/Member (Judicial)

Messrs TAYABBA AGENCIES and 2 others

Versus

ADDITIONAL COLLECTOR OF CUSTOMS-IV and another

Appeals Nos. K-1404 to K-1407 of 2011, decided on 12th August, 2013.

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

----Ss.129, 207 & 208---Customs General Order (XII of 2002), para. 31--Trans-shipment of goods to foreign country---Clearing Agent authorized by importer for submission of goods declaration---Scope---Submission of goods declaration by Clearing Agent amounted to authorization given by importer---Contention that customs officials could not ask the Clearing Agent/appellant to submit separate authorization from importer for transmitting goods declaration---Validity---Appellant Clearing Agent submitted goods declaration before the Customs for transmission of goods to foreign country---Submission of goods declaration by the Clearing Agent was deemed to be an authorization of the importer, the same was accepted by the Customs as valid and no separate authorization was required under any provision of the Customs Act, 1969 or under the (Afghan) Transit Trade Rules or para. 31 of Customs General Order 12 of 2002---Filing of goods declaration before customs amounted to authorization to Clearing Agent---Clearing Agent who undertook the job of transiting the goods were issued smart card by the Customs Agents Association---No separate authorization was required by the Clearing Agent from the importer of Foreign Country (Afghanistan)---In the presence of goods declaration, the customs never ever demanded separate authorization from any Clearing Agent and this was the adhered mechanism honoured by the customs since decades.

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

----Ss.129, 156(1) Cl.64 & 194-A---Appeal to Appellate Tribunal--- Trans-shipment of goods to foreign country (Afghanistan)---Show-cause notice to Clearing Agent---Scope---Clearing Agent/appellant was imposed a penalty in pursuance of show-cause notice on the charge of contravening the provisions of S.129 of the Customs Act, 1969---Appeal filed by Clearing Agent before Collector of Customs (Appeals) was dismissed---Contention was that no charge could be levelled against appellant under machinery provisions of law---Validity---Show-cause notice was served under S.129 of Customs Act, 1969 which was not a charging section rather the same was simply a machinery provision---No show-cause notice could be issued by any authority under S.129 of the Customs Act, 1969---No Rules were made under S.129 of the Customs Act, 1969 for (Afghan Transit) Trade at the time of issuing show cause notice---Show-cause notice had not mentioned any Rules which were contravened by the Clearing Agent---Order of adjudication being ultimately based on a ground which was not mentioned in show-cause notice was palpably illegal on the face of it---Appeal was allowed.

2001 SCMR 838; 2006 SCMR 1519 and Rehm Din v. Collector of Customs 1987 SCMR 1840 rel.

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

----Ss.129, 156(1), Cl.64 & 194-A---Customs General Order (12 of 2002), Para. 31---Appeal to Appellate Tribunal---Trans-shipment to foreign country/Afghanistan---Cross Border Certificate (CBC), submission of---Show-cause notice to Clearing Agent for non submission of cross border certificate---Scope---Importer of foreign country had imported consignments without payment of customs duty and other leviable taxes for onward transit to Afghanistan/foreign country through the appellant Clearing Agent---Customs authorities handed over the goods to the appellant Clearing Agent for transportation to foreign country/Afghanistan---Subsequently, the customs authorities asked the appellant Clearing Agent to submit the requisite cross border certificate in respect of the consignments---Appellant Clearing Agent failed to submit cross border certificate to the effect that the goods had crossed the border of Pakistan which meant that goods were consumed inside Pakistan, causing loss to the government exchequer---Customs authorities after serving show-cause notice had imposed a penalty on the appellant Clearing Agent for violating the provisions of S. 129 of the Customs Act, 1969 and causing loss to the government exchequer---Appeal filed by Clearing Agent was dismissed by the Collector of Customs (Appeals)---Contention of the appellant was that being Clearing Agent he was not responsible for submitting cross-border certificate and as such the penalty was illegal---Validity---Consulate General of foreign country/Afghanistan submitted an authority letter/undertaking to the Collector of Customs (Appraisement) for clearance and transportation of transit goods---Consulate General also undertook that the cargo in transit to Afghanistan would not be used/consumed in Pakistan and Cross Border Certificate would be furnished within fifteen days of its crossing the border---Consulate General authorized the Clearing Agent/appellant for clearance of the goods from Karachi port to transit to Afghanistan---Clearing Agent got the goods cleared from Karachi port and handed over to the National Logistic Company for trans-shipment, thereafter the job of Clearing Agent was concluded and it was for the Consulate or the Border Agent to submit Cross Border Certificate to customs---Impugned order of imposing penalty upon appellant clearing agent was declared as null and void---Appeal was allowed.

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

----Ss. 179(3) & 194-A---Appeal to Appellate Tribunal---Extension of time by Collector---Order in original was time barred---Scope---Impugned penalty order was passed by Collector of Customs after the expiry of prescribed time period---Effect---Order-in-original should have been passed within 120 days from the date of issuance of show cause notice or within a further extended period of 60 days due to emergence of "exceptional circumstances" prior to the expiry of initial period of 120 days after serving a notice to the person concerned---Order-in-original was passed after the expiry of entire period of 180 days without any extension prior to the expiry of 120 days---Order-in-original was silent in respect of extension of time---Order-in-original was barred by time and as such was without power/jurisdiction and not enforceable under law---Impugned order was set aside---Appeal was allowed.

1999 SCMR 1881; PTCL 2005 CL 841, 1998 MLD 650; 2004 PTD (Trib.) 2898; 2004 PTD 369; 2005 PTD 23; 2007 PTD 2092; 2008 PTD 609; 2008 PTD 578; 2009 PTD (Trib.) 1263; 2009 PTD 762; 2010 PTD (Trib.) 23; 2010 PTD (Trib.) 81; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117 and 2006 PTD 340 rel.

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

----Ss. 179(4) & 194-A---Appeal to Appellate Tribunal---Extension of time by Federal Board of Revenue after the expiry of prescribed period of decision---Scope---Order-in-original imposing penalty on appellant was time barred---Effect ---Federal Board of Revenue extended the time period after 29 days of the expiry of entire period of 180 days---Validity---Board was not empowered to extend the time period of decision/adjudication after the expiry of prescribed time limit---Once the matter stood lapsed, no extension could be granted---Extending time by the Board was akin to giving a new lease of life into dead entity which tantamounted to flogging a dead horse---Event or documents had become dead on account of non-timely extension of time period prior to expiry of stipulated period was legally considered dead and new spirit could not be infused into it by any means or on account of any reason whatsoever--- Impugned orders were set aside---Appeal was allowed.

1999 SCMR 1881; 2007 PTD 117; Messrs Supra Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and another 2008 PTD 60; 2006 PTD 340; 1998 MLD 650; 2004 PTD (Trib.) 2898; 2004 PTD 369; 2005 PTD 23; 2007 PTD 2092; 2008 PTD 609; 2008 PTD 578; 2009 PTD (Trib.) 1263; 2009 PTD 762; 2010 PTD (Trib.) 23; 2010 PTD (Trib.) 81; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631; 2010 PTD (Trib.) 1636 and 2010 PTD (Trib.) 2117 rel.

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

----Ss. 179(4) & 194-A---Appeal to Appellate Tribunal---Non-observance of time limit prescribed under provisions of Customs Act, 1969---Extension of time by Federal Board of Revenue after the expiry of prescribed period of decision---Effect---Order-in-original imposing penalty on appellant was time barred---Customs officials had taken stand that Board had extended the prescribed time period and mere non-observance of time limit would not render the lawful act as illegal---Validity---Customs authorities were not performing their duties under the Constitution but under the provisions of Customs Act, 1969---Any act done contrary to the provisions of said Act render the whole exercise nullity and ab initio void on account of suffering from lack of power/jurisdiction---Impugned order was set aside---Appeal was allowed.

Messrs Pakistan Ordinance Factory (POF),Wah Cantt. v. Collector of Customs, Sales Tax (Adjudication) 2012 PTD 1016 rel.

PLD 2006 SC 209 = 2006 PTD 769 distinguished.

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

----Ss. 193-A(3) & 194-A---Appeal to Appellate Tribunal---Extension of time period by Collector of Customs (Appeals)---Scope---Collector of Customs (Appeals) had passed order after the expiry of prescribed time period---Extension in time period was given after the expiry of initial period---Effect---Order-in-appeal should have been passed by the Collector of Customs (Appeals) within 120 days from the date of filing of appeal or within a further extended period of 60 days prior to the expiry of initial period of 120 days with reason to be recorded for extension in writing---Collector of Customs (Appeals) had not extended time period of decision prior to expiry of initial period of 120 days instead he granted extension after the expiry of said period--- Extension granted by the Collector of Customs (Appeals) was without lawful authority as time had been extended after the lapse of initial period of 120 days---Order-in-appeal was barred by time---Impugned orders were set aside---Appeal was allowed.

2007 PTD 117; 2008 PTD 60; 2007 PTD 2092; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117; 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 (Trib.) 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 rel.

Nadeem Ahmed Mirza for Appellant.

Irfan Baig for Respondent.

Dates of hearing: 25th April, 15th May, 4th, 25th June, 8th, 22nd and 25th July, 2013.

2013 P T D (Trib.) 691

[Customs Appellate Tribunal, Karachi]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

COLLECTOR OF CUSTOMS through Assistant Collector of Customs (Law), Karachi

Versus

Messrs HAYAT SWEET INDUSTRIES, NASIMABAD and another

Customs Appeal No.K-1077 of 2011, decided on 29th June, 2012.

Customs Act (IV of 1969)---

----S.19---S. R. O. 575(1)/2006 dated 5-6-2005---PT'C Heading 8438.6000---General power to exempt from customs duties---Agriculture machinery---Classification of PTC Heading---First Appellate Authority set aside the order-in-original and ordered for release of machinery imported under PCT Heading 8438.6000 on the ground that machinery fell under Cl. (13)(1) of Serial No.1 of the S.R.O. 575(1)/2006 dated 5-6-2006; that since the functions performed by the machinery imported were similar to the functions of machinery of PCT Heading 8438.6000 (Machinery for preparation of Fruits, Nuts or Vegetables), the same was correctly classifiable under such heading; and classification (PCT Heading 8438.8090) determined by the adjudicating officer was set aside---Revenue contended that importer's declaration was "Ethinic Snack Frying System "; that by nomenclature of declared description was not covered under PCT Heading 8436.6000; and that by considering the provisions of Rr. 3(3), 3(c) & 4 of the general rules for interpretation of harmonized system the imported Snack Frying System was correctly classifiable under PCT Heading 8438.8090---Validity---Catalogue of machinery showed that it was an all-in-one type of advance machine which performs multiple functions such as shelling (in case of nuts), peeling (in case of pulses), dough making, batter mixing, frying by means of beat wave frying system, seasoning, filling and packing of such agricultural products as peanuts, green peas, almonds, pulses---Products were agro-products and machinery imported was meant for performing various processes on them from production of namkeen snacks---Evidence on record categorically established that importer was in the business of production of namkeen food items and that 98% of such products were being exported---Machinery fell under Cl.(13)(1) of Serial No.1 of the S.R.O. 575(1)/2006 dated 5-6-2006 and the benefit of such notification was admissible to the same---Since functions performed by the machinery imported were similar to the functions of machinery of PCT Heading 8438.6000 (Machinery for preparation of Fruits, Nuts or Vegetables) through the change of PCT Headings and claim of the same thereon were of no use nor there was any violation committed by the importer nor made any ntisdeclaration at the time of claiming the exemption but the same was in accordance with law---No illegality or infirmity in the order passed by the First Appellate Authority having been found same was up-held by the Appellate Tribunal--Departmental appeal being devoid of merits was rejected.

Messrs P &G International Lahore v. Assistant Collector of Customs Appraisement, Gr-II, Karachi and 3 others 2010 PTD 870 ref.

Ghulam Yasin, Appraising Officer for Appellant.

Syed Irshad Ali, for Respondents.

Date of hearing: 15th June, 2012.

2013 P T D (Trib.) 1253

[Customs Appellate Tribunal, Karachi]

Before Ch. Imran Masood, Member Judicial-I

Customs Appeal No. 453 of 2011, decided on 29th June, 2012.

Customs Act (IV of 1969)---

----Ss. 25, 79, 80, 81, 179 & 193---Determination of customs value of goods---Appeal to Collector (Appeals)---Maintainability---Importer/ respondent filed goods declaration---Assessing Authority observed that declared value was on lower side, and assessed the goods declaration provisionally under S.81 of Customs Act, 1969---Importer being aggrieved by said assessment filed appeal before Collector (Appeals), who accepted the same---Maintainability of appeal was challenged by the department, contending that final determination order passed under S.81 of Customs Act, 1969 was not appealable under S.193 of Customs Act, 1969 before Collector (Appeals)---Validity---Under provisions of S.193 of Customs Act, 1969, remedy of appeal before Collector (Appeals), was available to any person, other than an officer of customs, aggrieved by any decision or order passed under Ss.79, 80, 81 and 179 of the Customs Act, 1969---Contention that said appeal was not maintainable, was misconceived---Appeal filed by the department, was dismissed, in circumstances.

Liaq Shah, A.O. for Appellant.

Zafar Iqbal, A.R. for Respondent.

Date of hearing: 14th April, 2012.

2013 P T D 1708

[Customs Appellate Tribunal, Karachi]

Before Ghulam Ahmed, Member (Technical-II)

Messrs HAZRAT NOOR through Duly, Constituted Attorney

Versus

DEPUTY COLLECTOR OF CUSTOMS

Customs Appeal No.K-1345 of 2011, decided on 11th June, 2013.

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

----Ss.32(1), 32-A, 16, 25, 25A, 80, 156(1)(9)(14), 193, 195 & 202---Customs Rules, 2001, Chapter XI, (Rr.133 to 215)---Imports and Exports (Control) Act (XXXIX of 1950), S.3(3)---Sales Tax Act (VII of 1990), S.33---Income Tax Ordinance, (XLIX of 2001), S. 148---Customs General Order 14 of 2005 dated 6-6-2005---Valuation Directorate Letter No.1/5/2009-VIIA/ 3077, dated 31-5-2010---False statement, error, etc.---Fiscal fraud---Personal Baggage Scheme---Re-assessment of the vehicle was made on the ground that vehicle was cleared on suppressed value which resulted in short recovery of duties and taxes as the Manufacturer's Suggested Retail Price (MSRP) was more than the declared and assessed value---Validity---Vehicle had been allowed release after due consideration as per old precedent during the time of presentation of document---Till the release of vehicle, the department was at liberty to investigate and approach the relative department i.e. Director General of Valuation of its advice; in case of having any doubt or to allow swift clearance, the vehicle could have been allowed provisional release, till the department was satisfied to have come to right determination of value and vehicle had been allowed release under S.80 of the Customs Act, 1969, with due consideration---Later on, case of short recovery of duty and taxes was made out on the observation of a letter which was a communication of the minutes of meeting---Besides, the value assessed was based on the concept of Maximum Selling Retail Price (MSRP) available on the internet and websites in different parts of the world---Application of the concept was in negation to the conception of determination of Customs Value under S.25 of the Customs Act, 1969 and was alien to the scheme of things prescribed thereunder---Reliance on the same could not be made as different markets and retail outlets at different places even within the same city cater to different buying capacity of the buyers and could not be made a bench mark---Concept of Maximum Selling Retail Price (MSRP) was void---Cardinal principles were not followed and plea taken by the department for assessment on the basis of Maximum Selling Retail Price (MSRP) did not have any criteria under any warrant of law to be accepted---Guideline as provided under Customs General Order 14 of 2005 dated 6-6-2005 read with legal obligations under Ss.25 and 25(1) of the Customs Act, 1969 had not been followed stricto sensu---Order in question was patently infested with legal and factual improprieties without application of judicious mind/and was based upon assumptions, presumptions and inferences deduced wrongly beyond the terms of the show cause notice---Order was held unlawful and void and appeal was allowed.

Sheraz Shipping Company v. Collector of Custom PACCS Customs Appeal K of 2013 rel.

(b) Legal Practitioners and Bar Councils Rules, 1976---

----R.109(b)---Denial of admissibility of special power of attorney---Validity---First Appellate Authority observed that "special care would need to be taken with regard to acceptance of any special power of attorney"---In spite of taking special care about doing so, First Appellate Authority without applying its judicious mind, denied the admissibility of special power of attorney---Subject power of attorney was duly registered/attested by the competent authority in as much as properly notarized as per prescribed law---Vakalatnama submitted by the counsel was within the parameters prescribed in the Pakistan Legal Practitioner and Bar Council Rules, 1976---Rule 109(b) of the said Rules entitled the registered advocate to appear, act and plead the case before any court or Tribunal in Pakistan---Every advocate was duty bound to uphold the dignity and high standard of his profession, as a member---Advocate owned entire devotion to the interests of the client, zealous in maintenance and defense of his rights and the exertion of his utmost learning and ability, nothing be taken or withheld from him in discharge of them save by rules of law legally applied---Observation of First Appellate Authority in the order about the question of "locus standi" on part of the counsel was devoid of law based upon assumptions, perverse fanciful and irrelevant with no evidence---Wrong inference was drawn from the evidence on record which was serious violation of prescribed rules, law and statute knowingly committed by the adjudicating officer---Record clearly reflected the professional conduct of the advocate well within parameters as defined in the Legal Practitioners and Bar Council Act, 1973.

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

----Ss.32(1) & 32-A---False statement, error, etc.---Fiscal fraud---Personal Baggage Scheme---Import of vehicles under Personal Baggage Scheme---Misuse of law---Appeal was disallowed by the First Appellate Authority on the ground of misuse of law relating to the import of vehicles under Personal Baggage Scheme---Validity---If such presumption was taken to be true then it was for the Federal Board of Revenue to set up an enquiry to investigate as to how long such malpractice was going on and who were the officials hands and gloves with unscrupulous importers, causing colossal loss of revenue to exchaquer and to review policy---Such open secret was perverse to the evidence on record---First Appellate Authority had not taken into consideration the grounds of the show-cause notice and gone beyond the terms of reference of show-cause notice---Any order which was based on the grounds not mentioned in the show cause notice was a void order.

Junaid Ghaffar for Appellant.

Abdul Aziz for Respondent.

Date of hearing: 17th May, 2013.

2013 P T D 2258

[Customs Appellate Tribunal, Karachi]

Before Ch. Niamatullah Chairman/Member Judicial-I and Ghulam Ahmed, Member Technical-II

Messrs KAKA TRADERS, KARACHI

Versus

DIRECTORATE GENERAL OF INTELLIGENCE and another

Customs Appeal No.K-617 of 2012, decided on 13th August, 2013.

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

----Ss.32(1), (2) & 156(1)---Sales Tax Act (VII of 1990), Ss.7A(2), 33, 34 & 36---Income Tax Ordinance (XLIX of 2001), Ss.148, 161(2) & 162---Show-cause notice---Recovery of evaded amount of sales tax and short-levied withholding tax on imports---Scope---Contention was Customs authorities were not designated as an officer of inland revenue, as such they were not empowered to investigate any matter in respect of Sales Tax and Income Tax---Show-cause notice and penalty order passed by customs officers, therefore, was in excess of jurisdiction---Validity---Customs authorities were empowered to make recovery of the escaped amount of sales tax and withholding income tax on imports.

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

----Ss.32(1), 2, 32-A, 207, 208, 209 & 194-A---Appeal before Appellate Tribunal---Misdeclaration---Evasion of tax and duties---Show-cause notice---Personal penalty on Clearing Agent without invoking the penal provision in the show-cause notice---Scope---Importer was served with a show-cause notice for evading minimum value addition tax by disposing of the impugned goods in the same state without putting them into further process of manufacturing---Customs official while passing order of recovery against importer also imposed personal penalty on Clearing Agent for not fulfilling its responsibilities under law---Contention of the appellant (Clearing Agent) was that in absence of any mala fide on the part of Clearing Agent the impugned penalty could not be imposed and opinion framed by the adjudicating officer was without any evidence---Validity---Clearing Agent had filed the goods declaration and discharged his responsibility correctly---Act of connivance as charged in the show-cause notice had not been specified---Neither specific charge of connivance as to the role of Clearing Agent had been mentioned nor the relevant provisions of Ss.207, 208 & 209 of the Customs Act, 1969 had been invoked---Invoking penal provisions of law without mentioning the same in show-cause notice was void---Appeal was allowed.

Collector Central Excise and Land Customs and others v. Rahmdin 1987 SCMR 1840; D.G. Khan Cement Co., Ltd., Lahore v. Collector of Customs, Sales Tax and Central Excise Multan 2003 PTD 1797 and Messrs Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 rel.

2010 PTD (Trib.) 1636; 2009 PTD 1112; 2010 PTD 465; PLD 1971 SC 184; 1992 ALD/449; 2004 PTD 624; PLD 1976 SC 514; PLD 2001 SC 514; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; E.A. Avans's case PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; 2009 PTD 1507; PLD 1996 Kar. 68; 2006 PTD 978; 2002 PTD 976; 2002 SCMR 312; 2005 PTD 492; 2010 SCMR 431; 1990 SCMR 1072; 1990 SCMR 1059; 1975 SCMR 352; PLD 1995 SC 396; 1998 SCMR 1404; PLD 1997 SC 5829; PLD 1997 SC 334; 1997 SCMR 1874; 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; 2003 PTD 2369; PLD 1995 SC 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 ref.

Nadeem Nirza for Appellant.

Saud Khan (I.O.) for Respondents.

Date of hearing: 23rd July, 2013.

2013 P T D (Trib.) 783

[Customs Appellate Tribunal, Lahore]

Before Ch. Imran Masood, Member Judicial

Messrs PERVAIZ UMER ENTERPRISES, LAHORE

Versus

DEPUTY COLLECTOR OF CUSTOMS, AFU, LAHORE

Customs Appeal No. K-317 of 2010, decided on 16th June, 2011.

Customs Act (IV of 1969)---

----S.209---Clearing Agent of importer---Charge of mis-declaration of value of imported goods---Agent's plea was that he had filed goods declaration on basis of documents received from his importer---Order of adjudication authority for releasing goods against redemption fine and duties and others, while imposing penalty on clearing agent---Validity---Authority had not charged the Agent for maneouvering of invoice or getting any benefit---Agent had filed goods declaration in normal course of his business on basis of documents and information provided by the importer---Agent could not be said to be a party to any illegal arrangement which might have been in mind of his importer---Nothing was available on record to show the Agent to be beneficiary of evasion of taxes directly or indirectly---Agent could be make liable for an act of commission or omission on part of the import only on the basis of clear finding based upon legal evidence of being active and conscious part to manipulation, which was missing in the present case---Penalty imposed on the clearing Agent was set aside in circumstances.

Ahsan Mehmood for Appellant.

Ahmad Kamal D.R. for Respondent.

2013 P T D 1698

[Customs, Appellate Tribunal, Lahore]

Before Ch. Muhammad Asghar Paswal, Member Judicial

Messrs AL-AZIZ ROTOFLEX (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION) MODEL CUSTOMS COLLECTORATE

Customs Appeal No.C-148 of 2012, decided on 11th March, 2013.

Customs Act (IV of 1969)---

----Ss.202, 83, 21 & 156(1)(11)---Sales Tax Act (VII of 1990), S.6---Federal Excise Act (VII of 2005), S.14---Income Tax Ordinance (XLIX of 2001), S.148---DTRE Rules, Rr.305, 307A & 307G---Recovery of government dues---Import of white label BOPP Film without payment of duty and taxes for use in manufacturing of BOP film for the purpose of export---Revenue alleged that DTRE user failed to export even a single kilogram of BOPP film printed against the subject DTRE approval within prescribed time limit and directed to deposit government duty and taxes along with additional duty and taxes---Importer contended that show-cause notice as well as order-in-original was beyond the scope of DTRE as the goods had been exported---Validity---Appellant had purchased local BOPP films from Tri pack in huge quantity to be consumed for local sale---Samples obtained by the Auditing Team was not taken as per law; neither the papers were signed by the appellant nor one signed copy provided to the appellant---Auditing Team did not consider the appellant's version during the visit that material imported under DTRE was under production and most of it was ready for export---Record revealed that Auditing Team collected the stickers of irrelevant material just to create a fictitious demand against the appellant---No loss of revenue had occurred to the National Exchequers from the delayed export made by the appellant which was even beyond his control---Benefits could not be denied merely on technicalities---Order-in-original was set aside by the Appellate Tribunal and appeal was accepted.

2012 SCMR 1526 and (1976) 34 Tax 54 rel.

Muhammad Imran for Appellant.

Muhammad Ismail D.R. with Asif Hussain Inspector for Respondents.

Date of hearing: 6th March, 2013.

2013 P T D (Trib.) 1786

[Customs Appellate Tribunal, Lahore]

Before Ch. Muhammad Asghar Paswal, Member (Judicial)

Sheikh FAROOQ AHMAD

Versus

COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.70 of 2012, decided on 8th July, 2013.

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

----Ss.194-A (5) & 215---Appeal to the Appellate Tribunal---Service of order, decision etc.---Condonation of delay---Copy of order-in-original was not served/communicated to the appellant as he was out of Pakistan for quite a long time---Factum of passing the order-in-original came to the knowledge of the appellant on 20-02-2012 certified/attested copy of the order-in-original was issued and was received on 14-3-2012, in such scenario the order-in-original could not be communicated or served upon the appellant in person---Section 215 of the Customs Act, 1969 had enumerated the modes and the manner in which service of order, summons etc. could be affected---Evidently, such mode of service had not been followed for the purpose of service of order-in-original upon the appellant---Where an order or judgment had not been communicated or served or conveyed to the party, limitation in filing the appeal would not start running---Circumstances warranted to condone the delay in filing the appeal and it was ordered by the Appellate Tribunal accordingly.

1960 PTD 1045; 2002 PTD 1035; 2010 PTD 2261 and 2010 PTD (Trib.) 1904 rel.

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

----Ss. 156(1) (14) (50) (51) (58) (59), (61), (62) (90), 13, 32(1)(2), 79, 84, 86, 88, 97, 104, 116, 162, 163, 168(3) & 178---Punishment for offences---Removal of goods from private bonded warehouse---Penalty was imposed on the appellant on the ground that he had played pivotal role in evasion of customs, duty and other taxes as he settled the deal with the indenter for import of consignment; and in league with co-accused hired a premises which premises was used for illegal storage of bonded goods and he, keeping himself behind the screen managed all the affairs and committed the fraud; that he had neither joined the investigation nor had appeared before the Trial Court and that he had been declared absconder by the court of Special Judge Customs, Taxation Anti Smuggling---Validity---Assuming that the appellant guided in arranging the premises on rent as alleged in the show cause notice that did not in any manner whatsoever led to an adverse inference to be drawn against the appellant and that no element of mens rea or actus reus was involved or alleged in the show cause notice against the appellant---Penal provisions, in circumstances, were not attracted against the appellant, as it was nowhere alleged in the show cause notice, that the appellant removed the goods from the bonded warehouse or for that matter was privy to the alleged offence---Proprietor of the firm made it very much clear that the goods were actually removed by him only and rest of the parties to the show cause notice were having no linkage/concern with any activity carried out by him---Licensee of the private customs bonded warehouse, during the hearing had also admitted that the goods were removed by him and such submission had been incorporated in the show cause notice---In the presence of confessional statement given before the Special Judge, Customs and also in the written statement before the Collector (Adjudication) there remained no logic and reasoning to implicate and impose penalty on the appellant---Action on the part of Department imposing penalty upon the appellant was illegal, void ab initio, without lawful authority and jurisdiction, preposterous, based on wanton and callous behavior and as such was nullity in the eyes of law---Order-in-original was set aside to the extent of the appellant only by the Appellate Tribunal.

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

----S.86---Wherehousing of goods---Removed of goods---Evidence---Presumption or assumption, howsoever strong and high it might be would not lead to an adverse inference in the absence of any solid and concrete evidence to the contrary.

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

----S.86---Wherehousing of goods---Removal of goods---Purported evidence---Purported parrot-like statements of the partisan witnesses had been projected to have been recorded by the Investigating Officer, as was reasonably suspected, to besmear the reputation of the appellant---No evidence much less incriminating evidence was available with the prosecution qua the appellant, and the purported evidence, if any, had no sanctity in the eyes of law, as the statements of parties' witnesses, if any, were not substantive piece of evidence, as such, was not admissible in the process of law.

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

----S.86---Wherehousing of goods---Removal of goods---Show cause notice---Adjudicating officer cannot go beyond the scope of the allegations/charges levelled in the show cause notice, and if it does so, the very action together with the super structure built thereon is blown to smithereens.

Shoeb Ahmad for Appellant.

Ghulam Bari, Inspector for Respondents.

Date of hearing: 16th May, 2013.

2013 P T D (Trib.) 1835

[Customs Appellate Tribunal, Lahore]

Before Ch. Niamat Ullah Chairman/Member Judicial and Ch. Muhammad Asghar Paswal Members Judicial

Messrs AUTOMOTIVE PRODUCTS (PVT.) LTD. and others

Versus

MUHAMMAD IJAZ and others

Custom Appeals Nos.237/LB and 238/LB of 2012 and C.As. Nos. 30/LB, 31/LB of 2013, decided on 28th July, 2013.

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

----S. 179(3)(4)---Order of Collector extending time for decision of case by Adjudicating Officer after expiry of period of limitation prescribed therefor---Validity---Proceedings before Adjudicating Officer had already abated due to expiry of limitation---Collector could pass such order within limitation period prescribed under S. 179(3) of Customs Act, 1969---Such extension of time would be immaterial in circumstances.

Abdul Zaheer and others v. Director-General, Pakistan Coast Guards and 4 others PLD 1990 Kar. 412; Haji Noor-ul-Haq v. Collector of Customs and others 1998 MLD 650; Messrs Super Asia Muhammad Din and Sons (Pvt.) Ltd. v. The Collector Sales Tax Gujranwala and another 2008 PTD 60; Messrs Pace International Rawalpindi v. Secretary Revenue Division Islamabad 2006 PTD 340; CBR/Sales Tax Department v. Messrs Pace International Rawalpindi PTCL 2005 CL 841; Messrs Tanvir Weaving Mills v. Dy. Collector Sales Tax and 4 others 2009 PTD 762; Messrs Miraj Din v. Collector of Customs (Appeals), Excise and Sales Tax, Lahore and 2 others 2009 PTD 2004 and Irshad Ahmed and another v. Deputy Superintendent Customs (AIB) Lahore and 6 others 2012 PTD (Trib.) 47 ref.

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

----S. 179(3)(4)---Decision of case by Adjudicating Officer---Extension of time by Collector without giving any reason therefor---Validity---Such order of Collector for being short of statutory requirements could not be termed as a valid order---Illustration.

Abdul Zaheer and another v. Director-General Pakistan Coast Guards and 4 others PLD 1990 Kar. 412; Haji Noor-ul-Haq v. Collector of Customs and others 1998 MLD 650 and Irshad Ahmed and another v. Faiz Ahmed Chaudhry, Deputy Superintendent Customs (AIB Lahore) and 6 others 2012 PTD (Trib.) 47 rel.

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

----Ss. 32, 32-A, 162, 163 & 168(1)---Criminal Procedure Code (V of 1898), S. 58---S.R.O. 486(I)/2007, dated 9-6-2007---Mis-declaration of transactional value of imported goods by under-invoicing same---Search warrants obtained from Court at Karachi, raid conducted and record seized at Karachi by Superintendent, Intelligence and Investigation-FBR of Lahore Directorate---Validity---According to S.R.O. 486(I)/2007, dated 9-6-2007, officers of Directorate could exercise powers and discharge duties of officers of Customs within areas of their respective jurisdiction---Neither any case was registered nor any investigation was pending at Lahore against appellant at time of such raid, search and seizure of his record at Karachi by Superintendent of Lahore Directorate---Staff of Lahore Directorate in such circumstances were not competent to conduct such raid at Karachi for being outside their territorial jurisdiction---Delegation of powers to Superintendent of Lahore Directorate under S. 168 of Customs Act, 1969 would not be helpful as powers under charging Ss. 32 & 32-A thereof were not vested with him under S.R.O. 486(I)/2007---Such record seized in illegal manner by Superintendent of Lahore Directorate could not be used against appellant for any purpose.

Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan 2003 PTD 2037; Food Consults (Pvt.) Ltd. Lahore and another v. Collector (Central Excise and Sales Tax) Lahore and 2 others 2004 PTD 1731; Federation of Pakistan through Secretary Ministry of Finance Islamabad v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Messrs Zakria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; Chairman Centred Board of Revenue v. Messrs Haq Cotton Mills (Pvt.) Ltd. Burewala 2007 SCMR 1039; Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd. and another 2007 PTD 2356; 2004 PTD 2994 and 2005 PTD 23 ref.

Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan 2003 PTD 2037; Food Consults (Pvt.) Ltd. Lahore and another v. Collector (Central Excise and Sales Tax) Lahore and 2 others 2004 PTD 1731; Federation of Pakistan through Secretary Ministry of Finance Islamabad v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Messrs Zakria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; Chairman Central Board of Revenue v. Messrs Haq Cotton Mills (Pvt.) Ltd. Burewala 2007 SCMR 1039 and Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd. and another 2007 PTD 2356 rel.

Mian Abdul Ghaffar Malik Muhammad Arshad, Raza Ahmed and Abdul Salam Sajid for Appellants.

S.M. Abbas Jafferi, I.O. for Respondent.

Date of hearing: 28th May, 2013.

2013 P T D (Trib.) 2013

[Customs Appellate Tribunal, Lahore]

Before Ch. Muhammad Asghar Paswal, Member (Judicial)

Messrs F.D.A.S. ARMS AND AMMUNITIONS and 4 others

Versus

DEPUTY COLLECTOR CUSTOMS (IMPORT EXAMINATION) and another

Customs Appeal No.133 of 2013, decided on 24th June, 2013.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 32, 156(1), 157, 168(1), 169(3) & 178---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---Import of 230 authomatic pistols of model Ziagana-63 from Turkey by mis-declaring same as semi automatic under PCT Heading 9302-0092---Seizure of such pistols and registration of criminal case against appellant---Authority alleged such pistols to be automatic for having a hole near trigger thereof, thus, classifiable under PCT Heading 9301.9041 and not importable under Import Policy Order, 2009---Validity---Appellant was licensed dealer of Arms and Ammunitions and authorised by Government to import semi-automatic pistols etc.---Report of Forensic Science Laboratory showed that such pistols were semi-automatic---Inspector of Armamanet, GHQ, reported that standard criteria for auto/semi automatic for all weapons could not be defined in general; that any pistol could be made auto or semi automatic with expert alteration; that current configuration of Ziagana-63 pistols was semi-automatic due to absence of sub-assembly, which could convert same to automatic weapon; and that such pistols as per design were automatic due to provision of 2 holes and a cavity on left side thereof, which could house a sub-assembly for convertion from semi-auto to automatic---Appellant had not imported sub-assembly of such pistols for their conversion into automatic---Both such reports showed such pistols in present condition to be semi-automatic---According to clarification sought by Department from Shipper/ Manufacturer in Turkey, such pistols were semi-automatic; that they could neither manufacture nor export automatic weapon as per rules of Turkish Government; and that small hole under grip of such pistols had been drilled on customer's demand to instal laser pointer thereto---Such pistols in their present design and configuration were semi automatic and importable under Import Policy Order, 2009 and classifiable under PCT Heading 9302.0092---Appellate Tribunal accepted appeal and directed release of such pistols on payment of duty and taxes leviable thereon as per law.

Abdul Salam Sajid for Appellant.

Maqsood Ahmad, D.S. for Respondent.

Date of hearing: 17th June, 2013.

2013 P T D (Trib.) 2082

[Customs Appellate Tribunal Bench-I, Lahore]

Before Ch. Muhammad Mubeen and Ch. Muhammad Asghar Paswal, Members (Judicial)

Messrs JAMIL BROTHERS IRON AND STEEL MERCHANT, MULTAN

Versus

COLLECTOR CUSTOMS, MODEL CUSTOMS COLLECTORATE, MULTAN and 2 others

C.A. No.253/LB of 2012, decided on 13th May, 2013.

Customs Act (IV of 1969)---

----Ss. 3-A, 18, 19, 32 & 156(1)---Raw material imported under concessionary notification by misdeclaration of its value---Cognizance of such offence taken by Deputy Director Intelligence and Investigation-FBR, Range Office, Multan---Validity---Impugned action taken by such Director was illegal as Intelligence Department was not competent and authorized to take action under S. 32 of Customs Act, 1969---Import documents and GD had been filed at Karachi, where offence of misdeclaration or evasion of tax, if any, took place, thus, Collector of Customs (Adjudication), Multan had no jurisdiction to entertain contravention report or issue show cause notice or pass impugned order---Importing and clearing Collectorate only could take cognizance of evasion of taxes at import stage---Initial action taken by such Director and Collector for being without jurisdiction had rendered entire subsequent proceedings to be ab initio void and of no legal effect---Tribunal set aside impugned order in circumstances.

2004 PTD 2994; 2005 PTD 23; PLD 1971 SC 124; 2006 SCMR 783; 2007 SCMR 729; 2007 SCMR 1835; 2006 SCMR 1713; PLD 1958 SC 104; PLD 1973 SC 326; PLD 2002 SC 630; 2003 SCMR 59; 2004 SCMR 28; 2004 SCMR 1798 and Messrs Capron Overseas's case 2010 PTD 465 ref.

Messrs Pioneer Steel Industries (Pvt.) Ltd. v. Collector of Customs, MCC, LMQ Road, Multan and 2 others 2013 PTD (Trib.) 1375; Mansab Ali v. Amir PLD 1971 SC 124; Faqir Abdul Majeed Khan v. District Returning Officer and others 2006 SCMR 1713 and Saeed Farooq v. The State and 2 others 1996 MLD 434 rel.

Mian Abdul Ghaffar for Appellant.

Muhammad Ismail D.R. with Javaid Bhatti, I.O. for Respondents.

Date of hearing: 30th April, 2013.

2013 P T D (Trib.) 2111

[Customs Appellate Tribunal, Bench-1, Lahore]

Before Ch. Muhammad Asghar Paswal, Member Judicial

BASHARAT HUSSAIN and another

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF PREVENTIVE and 3 others

C.A. No.170/LB of 2013, decided on 20th June, 2013.

Customs Act (IV of 1969)---

----Ss. 2(kk), 13, 95, 168(1) & 156(1)(90)---Foreign origin two Steel Coils---Seizure and confiscation of such coils for being non-duty paid and for non-production of relevant import documents thereof---Dismissal of appeal by Appellate Authority---Validity---Appellant being a registered importer/manufacturer/exporter was engaged in manufacturing of MS Pipes and export thereof and was maintaining a duly licensed manufacturing Bond at Islamabad---Record showed that appellant through Goods Declaration had sought trans-shipment of total 12 Coils from Karachi to his manufacturing Bond at Islamabad, out of which 10 coils had reached in Bond and had been entered in stock register---Nothing was on record to show that disputed two coils had been brought through un-authorised route as same had been seized at Lahore after having been dispatched under Safe Transport Scheme from Karachi to Islamabad---Appellant was entitled to import such coils as raw material without payment of duty and taxes for manufacturing of MS Pipes for exportation thereof---Impugned order had been passed at the back of appellant without addressing factual and legal issues raised by him---Appellant had lawfully imported disputed coils---Tribunal set aside both impugned and original orders in circumstances.

Abdul Salam Sajid for Appellant.

Sajjad Bokhari for Respondent.

Date of hearing: 19th June, 2013.

2013 P T D (Trib.) 327

[Customs Appellate Tribunal, Peshawar Bench]

Before Gulab Shah Afridi, Member (Judicial)

Messrs KHYBER TEA AND FOOD COMPANY, PESHAWAR and others

Versus

COLLECTOR OF CUSTOMS (APPEALS), PESHAWAR and 6 others

Appeal No. Cus.361/PB of 2010, decided on 8th November, 2012.

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

----Ss. 168, 169, 2(s), 6, 179, 187 & 201---Imports and Exports (Control) Act (XXXIX of 1950), S. 3(s)---Sales Tax Act (VII of 1990), Ss.22 & 73---Notification S.R.O. 913(I)/2005 dated 30-7-2005---Smuggling---Import of foreign origin black tea---Seizure and confiscation of goods and of vehicle carrying the same by Customs Authorities---Pecuniary jurisdiction---Persons authorized to seize and confiscate goods---Burden of proof---Scope---Accused company impugned seizure and confiscation of consignment of "black tea" by Customs Authorities which was upheld by Adjudicating Officer and Deputy Collector (Appeals)---Contentions of accused inter alia were that accused had purchased goods form a Sales Tax Registered Person and its possession of the same was not illegal and that accused was a bona fide purchaser of the goods in question---Validity---Evidence on record was that accused had purchased the goods (foreign origin black tea) from a "registered person" under the Sales Tax Act, 1990 and that said transaction was made in accordance with S. 73 of the Sales Tax Act, 1990 and in compliance with S. 22 of the Sales Tax Act, 1990; the accused had entered said transaction in the company purchase and stock register (Inward and outwards)---Accused subsequently sold the goods and had paid the input tax at purchase stage and output tax at supply stage---Goods were seized on 5-12-2009 and show-cause notice was issued to the accused on 5-1-2010 to which accused had replied on 13-1-2010; whereafter the Adjudicating Officer confiscated the goods on 25-1-2010---Adjudicating Officer had, therefore, without providing a further opportunity of hearing to accused, confiscated the goods---Validity---Further opportunity of hearing especially after accused had submitted a detailed reply to the show-cause notice (which required further investigation) was a fundamental and legal right of the accused and therefore, the order-in-original on this score was illegal---Customs Authorities failed to produce any written consent of accused in regard to auction of goods when it was mandatory upon them to obtain written consent of the owner of goods or person from whose possession the same were seized; under S. 201 of the Customs Act, 1969---Vehicle of accused had not been detected by Anti-Smuggling Unit but instead by the Police---Vide Customs Notification S.R.O. 913(I)/2005 dated 30-7-2005 the powers of Customs Authorities entrusted on Police under S.6 of the Customs Act, 1969 had been withdrawn and Police had no power to detain or seize goods having documents of lawful possession and legal import---Only officers notified under S. 6 of the Customs Act, 1969 could seize goods and give it in custody of Customs Authorities whereas Police officers were neither notified nor authorized officers of Customs within the meaning of Ss. 2(b), 3, 4 and 6 of the Customs Act, 1969---Seizure of goods by Police Officers, in the present case, was therefore illegal---Total value of the goods exceeded pecuniary jurisdiction of Deputy Collector under S.179 of the Customs Act, 1969---No deviation from the pecuniary jurisdiction could be made and if an action had been taken or order had been passed without having competency given under S. 179 of the Customs Act, 1969, same could be declared illegal and without jurisdiction---Deputy Collector, in the present case, wrongly assumed jurisdiction and any transgressions by Customs Authorities from S. 179 of the Customs Act, 1969 vitiated the entire proceedings---Investigations did not prove that documents produced by accused were bogus and burden of proof under S. 187 of the Customs Act, 1969 was an evidentiary burden requiring accused to establish a prima facie case only and ultimate burden or legal burden remained on Customs Authorities to prove the case against accused beyond reasonable doubt---In the present case, accused had proved said burden and then responsibility shifted on the Customs Authorities and mere allegations presented by Customs Authorities were not sufficient---Accused produced lawful import and purchase documents for the seized consignment---Customs Authorities seized black tea which was neither a notified item nor was banned and was freely importable and was not prohibited or restricted under the Import Policy---Customs Authorities, had therefore, failed to produce any evidence which could prove that import of said black tea was prohibited or restricted and had thus failed to prove the charge of smuggling---Order-in-original and order of Customs Collector were set aside and direction was given by the Tribunal to immediately work out payable sales proceeds for the goods payable to the accused---Appeal was allowed, in circumstances.

Nosherwan v. Collector of Customs Peshawar PTCL 2005 CL 378(sic); PLD 1968 Kar. 599; PLD 1969 SC 53; PLD 1977 Lah. 1318; PLD 1975 Kar. 482; 2010 PTD 2086; 2010 PTD 465; 2003 SCMR 1505; PLD 1972 SC 271; 1998 SCMR 1404; 1999 SCMR 412; PLD 1998 SC 64; PLD 1997 Lah. 1; PLD 1995 Kar. 587; PLD 1992 SC 455; PTCL 2003 CL 599(sic); PLD 1975 Kar. 782; 2005 PTD 23; 2008 PTD 1024 and 515; 2009 PTD 500; 2006 PTD 2177; 2006 PTD 534; PLD 1971 SC 124; 2006 SCMR 783; 2007 SCMR 729; 2007 SCMR 1835; 2009 PTD 642; 2006 PTD 703; 2000 YLR 1108; 2005 PTD 1813; 1983 PCr.LJ 1351; SAO No.175 of 2004 dated 11-10-2004; 2001 PTD 2097 = 2001 SCMR 1376 and 2005 PTD (Trib.) 135 rel.

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

----S. 201---Auction of confiscated goods---Failure of Authorities to produce written consent of the owner or person from whose possession goods were seized---Effect---Mandatory for Customs Authorities to obtain written consent of the owner of goods or person from whose possession goods were seized.

Nosherwan v. Collector of Customs Peshawar PTCL 2005 CL 378(sic) rel.

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

----Ss. 6 & 168---Notification S.R.O. 913(I)/2005 dated 30-7-2005---Entrustment of functions of Customs officers to certain other officers---Seizure of goods under S. 168 of Customs Act, 1969 by Police Officials---Validity---Vide Customs Notification S.R.O. 913(I)/2005 dated 30-7-2005, the powers of Customs Authorities entrusted on Police under S. 6 of the Customs Act, 1969 had been withdrawn and Police had no power to detain or seize goods having documents of lawful possession and legal import---Only officers notified under S. 6 of the Customs Act, 1969 could seize goods and give the same in custody of Customs Authorities whereas Police officers were neither notified nor authorized officers of Customs within the meaning of the Customs Act, 1969.

PLD 1968 Kar. 599; PLD 1969 SC 53; PLD 1977 Lah. 1318 and PLD 1975 Kar. 482 rel.

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

----S. 187----Burden of proof----Nature----Burden of proof as laid down under S. 187 of the Customs Act, 1969 was an evidential burden requiring the accused to establish only prima facie case and ultimate burden or legal burden remained on Customs Authorities to prove the case against the accused beyond reasonable doubt.

2000 YLR 1108 and 2005 PTD 1813 rel.

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

----Ss.157 & 158----Prevention of smuggling---Detention and seizure---Practice and procedure to be followed, stated.

(f) Jurisdiction----

----Elementary principle that if a mandatory condition for exercise of jurisdiction by court was not fulfilled, then entire proceedings, which follow suffer from illegality and were without jurisdiction.

PLD 1971 SC 124; 2006 SCMR 783; 2007 SCMR 729; 2007 SCMR 1835 and 2009 PTD 642 rel.

Pir Alam Shah, Consultant along with Atiqur Rehman, Advocate and Fakhr-e-Alam Managing Director for Appellants.

Naseer Khan, Superintendent Customs for Respondent.

Date of hearing: 12th September, 2012.

2013 P T D 600

[Customs Appellate Tribunal Peshawar]

Before Ghulab Shah Afridi, Member (Judicial)

Messrs KHYBER TEA AND FOODS COMPANY, PESHAWAR and 2 others

Versus

COLLECTOR CUSTOMS, MODEL CUSTOMS COLLECTORATE, PESHAWAR and 4 others

Custom Appeal No.108/PB of 2012, decided on 20th November, 2012.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 26, 157, 168, 179, 187 & 194-A---Import and Export (Control) Act (XXXIX of 1950), S.3(1)---Allegation of Smuggling---Seizure and confiscation of goods---Goods/Foreign Origin Black Tea, along with truck carrying said goods, were seized on allegation of smuggling---Additional Collector Customs, vide order-in-original, confiscated goods---Collector Customs on appeal, vide order-in-appeal dismissed the appeal---Adjudicating Officer verified the import documents produced by the appellant/importer at the time of interception of goods and subsequently; it was never pointed out that any document so produced by the importer was false, fabricated or untrue; and he was quite satisfied with the verification reports received in that regard from concerned quarters---Though a number of cases were made out against the importer and litigation had undergone between the department and the importer, but the importer had discharged his onus within the meaning of S.187 of the Customs Act, 1969; and had successfully met with the burden to prove the legal import---Burden to prove smuggling stood shifted to the department and department had no proof contrary to the proof produced by the importer---Department had failed to produce any evidence, which could prove that Tea imported by the importer, was prohibited or restricted by the Government---Department, in circumstances, had failed to prove the charge of smuggling against the importer---Contention of department was that non-mentioning of the country of origin in the sales tax invoice produced by the importer, was not plausible, because there was no such column for the origin in the sales tax invoice---Importer being a manufacturer could blend the tea and repack the same---Case, otherwise did not lie within the pecuniary competence and jurisdiction of Additional Collector of Customs---Under provisions of S.17(3) of Customs Act, 1969 case should be adjudicated within a period of 120 days from the date of show-cause notice but said period had expired and no plausible and cogent reason had been shown by the department for such delay for passing the order-in-original---Importer was established to have been doing business of Black Tea, and was duly registered with Sales Tax, Income Tax Department, and Chamber of Commerce and Pakistan Tea Association bodies etc.---Possession of huge quantity of Black Tea by the importer, did not create a suspicion that the recovered Black Tea was smuggled one---Goods seized, in circumstances, were lawfully imported---Seized/confiscated goods/Tea, could immediately be returned unconditionally to the importer, in circumstances.

PTCL 2004 CL 551; 2001 YLR 635; 1995 SCMR 387; 2003 PTD 2118; SAO No.175 of 2004 dated 11-10-2004; PTCL 2002 CL 95; PLD 1971 SC 124; 2009 PTD 642; 2010 PTD 465; 2010 PTD (Trib.) 2086; 1999 PTD 4126; 2006 SCMR 1713; 2004 SCMR 28; 2004 SCMR 1798; 2003 SCMR 59; PLD 2002 SC 630 and 2011 PTD (Trib.) 2480 rel.

2008 PTD 60 and 2008 PTD 2025 distinguished.

2007 SCMR 1095; 2007 PTD 1495; 2003 PTD 1797; 2003 PTD 1354; 2003 PTD 1361; 2002 MLD 180; 2009 PTD 2004; 2007 PTD 2265; 2009 PTD 762; 2011 PTD (Trib.) 2216; 2011 PTD 1076; PLD 2005 Pesh. 214; 2007 SCMR 1256 and 2010 SCMR 1408 rel.

Ateeq-ur-Rehman, Advocate, Syed Sikandar Hayat Shah, Advocate and Pir Alam Shah, Consultant for Appellants.

Naseer Khan, Superintendent Customs and Zia-ud-Din, Intelligence Officer for Respondents.

2013 P T D (Trib.) 15

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

HAZRAT AMAN and another

Versus

COLLECTOR CUSTOMS (APPEALS), PESHAWAR and 2 others

Cus. No.113/PB of 2010, decided on 25th January, 2011.

Customs Act (IV of 1969)---

----Ss.2(s), 16, 157, 178 & 156(1)(8), (89)---Imports and Exports (Control) Act (XXXIX of 1950), Ss.3(1) & 3(3)---Smuggling---Recovery of foreign origin scrap---Outright confiscation of such goods as owner of the goods failed to produce any proof with regard to legal import/lawful possession of goods so recovered; and released the vehicle against payment of 20% redemption fine of the customs value---Owner contended that goods were locally purchased from the market on payment of handsome consideration against proper purchase receipts; and examination/verification of scrap was conducted and a representative by the Chamber of Commerce was nominated and goods were examined, and given their opinion; and purchase receipts were neither verified by the seizing officer nor by the adjudicating officer without any reason---Validity---Goods were admittedly purchased from local market and this fact had duly been verified by the Commission constituted by the Appellate Tribunal at the request of the parties---Commission after verification of purchase receipts from the shopkeepers, had also recorded statements of the shopkeepers---Report as well as statements recorded by the commission revealed that the goods were purchased from the local market---If taken into consideration that the goods in question were of foreign origin then one could think that there were hundreds of shops/dealers of scrap in the vicinity, where lot of scrap of vehicles imported/locally manufactured, was available having a number of mechanics/workshops, conducting boring etc, by changing the old unserviceable parts and replacing same by new one---Large number of foreign origin vehicles were imported into Pakistan every year and when an item of these vehicles become out of order during its plying on roads as well as accidents/deterioration, then definitely these were replaced and as such the old/useless spare parts/accessories were sold to the shopkeepers/scrap dealers---Old scrap dealers after collecting a huge quantity of different items segregate the same and sell it to different consumers---Shopkeepers, from whom the scrap was purchased, had given their respective statements to have sold the scrap to the appellant/ owner of goods---Scrap was purchased from local market against proper purchase receipts, duly verified by the Commission and prosecution/department failed to bring on record as to whether the scrap was serviceable or unserviceable as evident from recovery memo---Appellate Tribunal accepted the plea of the appellants as well as considering the examination/verification report of the nominee of Chamber of Commerce and Industry and Bar Members that the goods were of foreign origin but used in Pakistan being parts of legally imported vehicles and collection of shopkeepers/scrap dealers from the workshops and become scrap, which meant that the same were not smuggled one, it was collected by the shopkeepers/scrap dealers after the same was out of order and subsequently, sold to the appellants against proper receipts---Prosecution had nothing to say about any marks and number on the goods seized to show the foreign originality of the goods---Orders of the authorities below were set aside by the Appellate Tribunal and ordered to release the scrap to the appellants unconditionally---Appellate Tribunal, however, ordered that the goods be handed over to the appellants after cutting, piercing and de-shaping at the cost of the appellants---Redemption fine imposed on the vehicle was remitted because, the driver had loaded the scrap from the local market against proper bilties for melting purposes not concealed, the contents were mentioned in the Bill of Entry, which reflected that they had no intention of smuggling or to avoid taxes, as such, the prosecution had failed to prove the existence of their case as mentioned under S.156(1)(8) of the Customs Act, 1969.

2004 PTD 1838 rel.

Waliullah for Appellant.

Yahya Jan, Superintendent, Azizur Rehman, Deputy Superintendent and Mamraiz Ali, Inspector Customs, for Respondents.

Date of hearing: 8th December, 2010.

2013 P T D (Trib.) 24

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Imran Masood and Muhammad Nadeem Qureshi, Members (Judicial-I)

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF APPRAISEMENT, KARACHI

Versus

Messrs UMAR ENGINEERING COMPANY, KARACHI

Customs Appeal No.453 of 2011, decided on 29th June, 2012.

Customs Act (IV of 1969)---

----Ss. 79, 80, 81, 179, 193 & 194-A---Assessment of duty---Appeal before Collector (Appeals), maintainability of---Importer, imported a consignment of Mineral Fibre Ceiling, and at the time of the assessment of the goods declaration, it was observed that declared value of goods was on lower side---Goods declaration was assessed provisionally under S.81 of the Customs Act, 1969, after securing the differential amount of duty and taxes in the shape of post dated cheques and the matter was referred to the Directorate of Customs for final determination of fair customs value---Directorate of Customs Valuation, determined the final customs---Importer being aggrieved by said final determination order passed under S.81 of Customs Act, 1969 filed appeal before the Collector (Appeals), who accepted the same and department being aggrieved from said order, had filed appeal before Customs Appellate Tribunal---Contention of counsel for the department was that the final determination order passed under S.81 of the Customs Act,1969 was not appealable under S.193 of the Customs Act, 1969 before Collector (Appeals)---Under provisions of S.193 of the Customs Act, 1969, the remedy of appeal before the Collector (Appeals) was available to any person, other than an officer of customs aggrieved by any decision or order passed under Ss.79, 80, 179 of Customs Act, 1969---Contention of the counsel for the department that decision made under S.81 of Customs Act, 1969 was not appealable before the Collector (Appeals), was without force---Appeal filed by the department was dismissed, in circumstances.

Laiq Shah A.O. for Appellant.

Zafar Iqbal, A.R. for Respondent.

Date of hearing: 14th April, 2012.

2013 P T D (Trib.) 35

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arshad Member (Technical)

Messrs REAL PAPER, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS, MCC OF APPRAISEMENT, KARACHI and another

Customs Appeal No.K-562 of 2011, decided on 19th August, 2011.

Customs Act (IV of 1969)---

----Ss. 15, 16, 17, 79, 80, 156 & 194-A---Import of banned goods and confiscation---"Job lot" and "stock lot"---Definitions and criteria---Importer of waste paper, filed a goods declaration for home consumption---Said goods declaration was processed under 1st Appraisement System and on examination of consignment the staff reported that the impugned goods, were not waste paper as declared by the importer, instead the same were reported to be "job-lot/stock-lot quality"---Committee consisting of seven officials including one Deputy Collector, after examining the goods ruled that the goods were Job-lot/stock-lot quality, which were banned for import---By impugned order, goods were ordered to be confiscated out rightly which order was upheld by Collector of Customs (Appeals)---Validity---Goods could be either "job-lot" or "stock-lot", and not both simultaneously because both had distinctive and different attributes---Criteria for the term 'job-lot' is for determining of any product as 'job-lot' was based on two attributes; (i) the goods should be collection of "odds" and "ends" and put for sales as one lot; and (ii) those should be of inferior quality---Examination report of consignment in question did not answer the said definition as the examination conducted by the examiner and subsequently by the Committee, at no place stated that the goods imported were collection of odds and ends; of inferior quality confirming that those stood excluded from the definition of 'Job-lot'---Goods in question were not attracted by the definition of 'job-lot' as those were not finished goods, rather raw material, goods produced from those would be ultimate product and out of which stock-lot goods would emerge after sale attracting the definition given in Sub-para (vi) of para 1 of Customs General Order 12/2002---Term "stock-lot" did not exist in paper, because of "change of taste was never there neither market condition affect those nor the goods so produced were depreciated in quality because of age"---Goods imported in the shape of paper/board or waste, therefore, did not fall within the purview of "stock-lot"---Impugned orders which were unlawful, illegal, coram non judice, discriminatory and issued without jurisdiction and in contravention of the infield policy decision of the Customs Collectorate, were set aside in, circumstances.

Lt. General (Retd) Shah Rafi Alam v. Lahore Race Club 2004 CLD 373; Khalid Qureshi v. UBL 2001 SCMR 103; East West Steamship v. Queen Land Insurance PLD 1963 SC 663; Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517; Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587; Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485; Central Insurance v. C.B.R. 1993 SCMR 1232; Messrs Muller and Phipps Pakistan (Pvt.) Ltd. v. The Collector of Sales Tax Enforcement LTU, Karachi S.T. Appeal No. 5 of 2007; Director, Directorate General of Intelligence and Investigation and others v. Al-Faiz Industries (Pvt.) Ltd. 2006 SCMR 129; Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Controller of Customs, (Valuation), 1992 ALD 449 (I); Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax 2004 PTD 624; Ali Muhammad v. Hussain Buksh and others PLD 1976 SC 514; Land Acquisition Collector, Nowshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; Satavir Singh v. U.O.L. AIR 1986 SC 555; B. Surinder Singh Kanda v. Government of the Federation L.R. 1962 (A.C.) 322; PLD 1968 Kar. 599; Messrs Forte Pakistan (Pvt.) Ltd., Karachi v. Director-General Intelligence and Investigation (Customs and Excise), Karachi and another 2006 PTD 978; 2011 PTD (Trib.) 788; H.M. Abdullah v. Collector of Customs (Appeals), Judgments No.1048 of 1999 The Collector of Customs and another v. Abdul Razzak PLD 1996 Kar. 451; Collector of Customs (Appraisement) v. H.M. Abdullah and another 2004 PTD 2993; Yousuf Enterprises v. The Collector 2005 PTD 21; Pakistan Dry Battery Manufacturers Association v. Federation of Pakistan 2006 PTD 674; B.F.J. Enterprises v. Additional Collector of Exports 2010 PTD (Trib.) 787; Tawakkal General Export Corporation v. The Collector of Customs, Exports PLD 1992 Kar. 199; Nazir Ahmed Tajdin v. Deputy Collector of Customs, Lahore and 2 others PLD 1977 Lah. 1392; 2009 PTD 1507 and 2005 SCMR 492 ref.

Nadeem Ahmed Mirza for Appellant.

Mir Alam, Appraising Officer for Respondents.

Date of hearing: 2nd July, 2011.

2013 P T D (Trib.) 52

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Imran Masood and Muhammad Nadeem Qureshi, Members (Judicial-I)

COLLECTOR OF CUSTOMS through Deputy Collector of Customs, Karachi

Versus

COLLECTOR, COLLECTORATE OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeal No.K-1353 of 2011, decided on 5th July, 2012.

Customs Act (IV of 1969)---

----Ss.32, 121, 128, 129, 156(1)(14) & 194-A---Mis-declaration---Consignment was got cleared vide Goods Declaration through clearing agent---Adjudicating Officer had found that weight of consignment was deliberately mis-declared; that goods contained in the container confirmed mis-declaration on account of description and quality of goods and ordered for outright confiscation of the consignment and imposed penalty on clearing agent---Collector (Appeals) vide order-in-appeal directed that the goods be released to the importer on payment of duty/taxes---Validity---Collector (Appeals) had rightly ordered release of goods on payment of duty/taxes for number of reasons that mala fide on the part of the clearing agent was not established from the evidence on record; that confiscation of goods was not in conformity with settled law; that due to the peculiar circumstances of the case, the department could not auction the goods, because such an action was likely to cause a lot of litigation, and in the end the goods being essentially perishable in nature, could expire and auction of the goods, if possible at all, would not fetch the Government any worthwhile revenue; that in the past the department had been releasing the goods imported on payment of duty/taxes on the request of importers and that Collector (Appeals) had rightly held that release of goods on payment of duty/taxes chargeable thereon would be more appropriate and more akin to the settled law---Appellant/Collector of Customs having failed to point out any illegality or infirmity in the impugned order passed by Collector (Appeals), appeal against said order was dismissed by the Tribunal.

1996 SCMR 727; 2004 PTD 2187 and PTCL 1996 CL 54 rel.

Muhammad Farooq, Law Officer, for Appellant.

Mian Abdul Ghaffar for Respondents.

Date of hearing: 10th May, 2012.

2013 P T D (Trib.) 65

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs ADVENT TECHNOLOGIES, LAHORE

Versus

ASSISTANT COLLECTOR OF CUSTOMS, (PaCCS, GROUP-II), KARACHI and another

Customs Appeal No.K-121 of 2010, decided on 28th April, 2012.

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

----S. 25(5)(6)---Transactional value of goods, rejection of---Scope---Transactional value could not be rejected on the mere ground that Customs department were in possession of evidential invoices of higher value---Transactional value could not be rejected on the mere ground that the Customs department had found that identical or similar consignments had been imported at a higher value---Valuation of goods being a quasi-judicial function, all judicial aspects were to be examined before accepting or rejecting the transactional values.

PTCL 1998 CL 243; Collector of Central Excise v. Imdad Ali 1969 SCMR 708; Indus Automobiles v. C.B.R. PLD 1998 Kar. 99; Zulfiqar Brotehrs v. Member Judicial 1990 ALD 12; Kamran Industries v. Collector of Customs PLD 1996 Kar. 68; Punjab Beverages Ltd. v. Appellate Tribunal 2002 PTD 2957; Aftab Ahmed v. Collector (Adjudication) 2004 PTD (Trib.) 2898 and Karachi Bulk Storage v. Controller of Valuation 2004 PTD 2592 rel.

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

----S. 81---Provisional determination of liability, limitation for---Period as prescribed under the law for the finalization of the assessment order was not extended, neither any exceptional circumstances were recorded, nor the same was issued or communicated to the assessee/ importer, which was violative and did not satisfy the parameters laid down in the provisions of S.81(2)(5) of Customs Act, 1969---Orders passed by the hierarchy of Customs were based on presumption and assumption and perverse from the evidence available on record---Said orders were set aside, in circumstances.

Mian Abdul Ghaffar for Appellant.

Ghulam Yasin, Appraising Officer for Respondents.

Date of hearing: 6th March, 2012.

2013 P T D (Trib.) 74

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Rozi Khan Burki, Member (Technical)

KAIBAT KHAN

Versus

COLLECTOR OF CUSTOMS (APPEALS), PESHAWAR and 2 others

Customs Appeal No.309/PB of 2011, decided on 27th June, 2012.

Customs Act (IV of 1969)---

----Ss.2(s), 16, 157, 156(1)(8) & (89), 168 & 179---Imports and Exports (Control) Act (XXXIX of 1950), Ss.3(1) & 3(3)---Smuggling---Recovery of foreign origin scrap---Outright confiscation of such goods as owner of the goods failed to produce any proof with regard to legal import/lawful possession of goods so recovered, and local scrap which had not been mentioned in the recovery memo. was ordered to be released unconditionally and vehicle, used for transportation of smuggled goods was also confiscated which was released on payment of 20% redemption fine of the customs value---Appellant contended that original triplicate copies of IGM were provided/handed over to the seizing officer but he did not heed to these documents and returned back to the appellant; and department did not bother to verify such G.D. Nos. from the concerned quarter and denied the genuineness of the documents in surmise manner---Validity---Appellant produced copies of GDs wherein the seized scrap was stated to be legally cleared on payment of leviable duties---Department could neither accept nor reject the genuineness of the contents and simply showed their doubts that the GDs might be relating to some scrap legally imported and produced nothing in support of their contention---Petitioner established the link of a few days earlier legal import through notified route and stated that they imported the scrap and dumped in the stores and took the required quantity of scrap of their melting unit but on the way the customs squad seized the same without considering the fact that it was legally imported---Although the appellant produced copies of GDs as evidence to prove legal import of the seized scrap, it was not sufficient to prove the fact whether the seized scrap was the same as shown in the GDs---Department also could not prove that the seized scrap did not belong to the GDs produced---Question remained unanswered and the doubt still remained there---Onus of proof was on the department and the department failed to disprove the contents of the GDs---Order of First Appellate Authority was set aside by the Appellate Tribunal and ordered unconditional release of seized scrap to its rightful owner.

Waliulllah for Appellant.

Sardar Ali, A.C. and Mazhar Muhammad, Superintendent for Respondents.

Date of hearing: 23rd May, 2012.

2013 P T D (Trib.) 78

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Syed Gul Munir Shah, Member (Judicial-I)

Messrs ARIF INDUSTRIES, KARACHI

Versus

COLLECTOR OF CUSTOMS, (EXPORT), KARACHI

Custom Appeal No.K-575 of 2007, decided on 30th July, 2010.

Customs Act (IV of 1969)---

----Ss. 25, 32, 156(1)(14) & 194-A---Misdeclaration of the value of exported goods---Weight of goods in question was found 16% and 14% less as against the declaration given by the exporter; and the declared value was also found over-invoiced---Valuation in the case had been assessed on the basis of report of Price Checking Committee and without following the directions contained in S.25 of the Customs Act, 1969---Exporter was not heard at the time of assessing the value by the Valuation Committee---Valuation Committee formed for determination of valuation had no legal value as there was no such provision in the Customs Act, 1969---Exporter had not appeared at the time of alleged assessment of value by the Price Checking Committee; and his objections raised were not attended to in his presence---Notice, no where disclosed the provisions of law violated by the exporter---Validity---If specific particulars were not stated in the notice, notice would be vague and would not be in conformity with the requirements of S.32(2)(3) of the Customs Act, 1969---Departmental Representative had admitted that in the report of the Committee, nothing was disclosed as to what methodology was applied for arriving at the conclusion that valuation was declared higher than the actual---Nothing was on record to indicate that exporter had claimed for larger amount of duty draw-back than due or admissible---Impugned order suffered from legal infirmity and imposition of fine was not supported by evidence or by valuation of the consignment declared was for larger amount of duty draw-back---No proper procedure was adopted for assessing the value as required under S.25 of the Customs Act, 1969---Impugned order based on no evidence and on illegal and wrong approach of law, was set aside---Show-cause notice and order-in-original being based on erroneous construction of law, had no legal effect.

PLD 1996 Kar. 68; PTCL 2000 CL 35; PLD 1996 Kar. 451; 2005 PTD 21; 2006 PTD 671 and 2004 PTD 2993 ref.

2005 PTD 21 and 2006 PTD 674 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Syed Zameer Akram, Appraising Officer, for Respondent.

Date of hearing: 28th July, 2010.

2013 P T D (Trib.) 495

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

Messrs AGE INDUSTRIES (PVT.) LTD., PESHAWAR

Versus

DEPUTY SUPERINTENDENT CUSTOMS (AUDIT), PESHAWAR and 2 others

Custom Appeal No.127/PB of 2011, decided on 1st October, 2012.

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

----S.32 (2)---S.R.O. 565(I)/2006 dated 5-6-2006---S.R.O. 565(I)/2005 dated 6-6-2005, S.No.13---S.R.O. 780(I)/2005 dated 6-8-2005---Pakistan Customs Tarrif Heading 7213.9100, 7213.9110 and 7213.9190---False statement, error, etc.---Demand for three years was confronted on the ground that goods were imported beyond their quota in the respective years and got it cleared under concessionary S.R.O. or PCT Heading other than mentioned in their quota allocated to them---Validity---Auditor conceded that excess quantity was liable to duty @ 10% instead of 25%, thus, at the most differential amount was to be recovered @ 5%, however, without assigning any reasons the adjudicating authority failed to give its assent to the finding of the audit officer---To finally determine the issue, the importer was allowed to substantiate their stance on the factual aspect by documentary evidence if any---Importer submitted all record along with written arguments; copy of which along with all supporting documents was supplied---Department avoided to meet the factual aspect, and hardly controverted the appellant's stand point at least on factual aspect of the case; in final analysis, based on record, it transpired that during 2005-2006, the importer imported High Steel Wire Rod (Primary Grade Material) vide 11 GDs wherein by four GDs 131.991 MT High Steel Wire Road were cleared on statutory rate of 10%, whereas rest of the 587.209 MT were cleared vide 7 GDs under the concessionary S.R.O.--Prima facie, the 72.709 MT quantity was in excess to the allocated quota 514.5 MT,---In next year 2006-2007, the importer imported 160.268 MT lesser than the allocated quota 571.428 MT---During the year 2007-2008, the importer had not contested, yet Rs.164,648 were excessively extracted by miscalculation by the Department---Besides on limitation, if period under audit it was to be taken cumulatively, the importer had imported lesser quantity under concessionary S.R.O. from the allocated quota---On factual aspect, hardly any mens rea could be attributed to the importer---Demands relating to the years 2005-2006 and 2006-2007 were not sustainable in the eyes of law---Appeal partially succeeded as the demand relating the years 2007-2008 was retained whereas demands relating to the years 2005-2006 and 2006-2007 were declared not sustainable both on point of law and facts---Order was set aside to that extent by the Appellate Tribunal and order was modified accordingly.

Tribunal Appeal Nos. 154/ST/IB/2005 and 155/ST/IB/2005; Messrs Gandhara Nissan v. Collector Customs 2007 PTD 117; 2007 PTD 127; 2011 PTD 110, 2010 PTD 324 and 2009 PTD 204 ref.

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

----Ss.32(3)(3A) & 156(1)---S.R.O. 565(I)/2006 dated 5-6-2006---False statement, error, etc.---Limitation---Entire execution of quota under concessionary S.R.O. 565(I)/2006 dated 5-6-2006 was controlled electronically by an officer not less than a Deputy Collector of Customs who was holder of the exclusive password of authorization and verification of import as per Survey Report under the said S.R.O. therefore, the said cause in absence of allegation of collusion, fell within the provision of subsection (3) and prevailing subsection (3A) of S.32 of the Customs Act, 1969, specially when show cause notice was issued as result of audit, as subsection (3A) of S.32 of the Customs Act, 1969 had a direct reference to audit, thus, no other subsection of S.32 of the Customs Act, 1969 except subsection (3A) was applicable---Short levy occurred in 2005-2006 was not recoverable for being barred by time---Section 32(2) of the Customs Act, 1969 was not attracted to the case as subsection (2) of S.32 of the Customs Act, 1969 could be invoked for two causes only "where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or change has not been levied or has been short levied…"---No such document or statement had caused the alleged short levy nor in the show cause notice any collusion was alleged---Though in show cause notice along with S.32(2) of the Customs Act, 1969 penal provision clauses 14 of S.156(1) of the Customs Act, 1969 were invoked, however, no penalty was imposed---Such fact alone warranted the non-application of S.32(2) of the Customs Act, 1969---Such was straight cause of inadvertence and error and misconstruction and fell within the purview of S.32(3) of the Customs Act, 1969.

2007 PTD 127; Messrs Khyber Lamps case 2001 SCMR 838; Civil Appeal No.2036 of 2004; 1992 SCMR 1898; 2011 SCMR 1279 and 2012 SCMR 392 rel.

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

----S.32---False statement, error, etc.---Section 32 of the Customs Act, 1969 would be attracted: (i) On filing deceptive, false and fake declaration, notice, certificate, document or statement (ii) issuance of notice within a period of three years for payment of specified amount in case of short levied of duty, its non-payment, erroneously refunded as a result of some collusion (iii) in case of inadvertence, error or misconstruction, non-levy or short levy or any charge/duty, the payment shall be made subject to notice within six months.

Isaac Ali Qazi for Appellants.

Sardar Ali Khan Assistant Collector and Naseer Khan Superintendent Customs for Respondents.

Date of hearing: 6th June, 2012.

2013 P T D 1647

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mher Muhammad Arif Sargana, Judicial Member and Khalid Naseem, Technical Member

Kh. MUHAMMAD WASEEM

Versus

SUPERINTENDENT, INTELLIGENCE AND INVESTIGATION and 2 others

C.A. No.603/LB of 2009, decided on 24th March, 2010.

Customs Act (IV of 1969)---

----Ss.32 156(1) & 168---Seizure of non-importable goods liable to confiscation---Seizing agency consisting of staff of Directorate of Intelli-gence and Investigation, Federal Board of Revenue not having charging powers under S.32 of Customs Act, 1969---Effect---Such seizure would be illegal and without jurisdiction---Illustration.

1987 SCMR 18; 2004 PTD 2994 and 2005 PTD 23 ref.

Malik Muhammad Arshad for Appellant.

Muhammad Sarwar, SIO for Respondent.

Date of hearing: 10th March, 2010.

2013 P T D 28

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD AZAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 341/LHR/IT(256)666 of 2012, decided on 28th September, 2012.

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

----Ss. 9(2)(b) & 2(3)---Income Tax Ordinance (XLIX of 2001), S.122(1)---Federal Tax Ombudsman, jurisdiction of---Scope---Alleged illegal assessment of tax---Assessing Officer arbitrarily ignoring evidence---Maladministration---Complainant was assessed to tax under S.122(1) of Income Tax Ordinance, 2001 but contested such assessment on ground that his sources of investment in the business were ignored by the Assessing Officer----Complainant regarding his sources of investment contended that such investment was contrived from the drawing he had made from a loan account and from certain foreign remittances, which were ignored by the Assessing Officer---Tax Department contended that present proceedings related to assessment of income, which did not fall within the jurisdiction of Federal Tax Ombudsman in view of the bar laid down in S. 9(2)(b) of Federal Tax Ombudsman Ordinance, 2000---Validity---Assessment per se was not the subject matter of the present complaint, rather multiple acts of maladministration by the Assessing Officer had been agitated---Maladministration involved arbitrarily ignoring the evidence on record regarding the drawings made by complainant and the foreign remittances received by him through banking channels to finance his investment in the business---Objection of Tax Department was misconceived in such circumstances.

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

---S. 10(3)---Income Tax Ordinance (XLIX of 2001), S.122(1)---Complaint against illegal assessment and re-assessment of tax---Limitation period---First tax assessment of complainant was dated 29-6-2009---Complainant contested such assessment before Commissioner (appeals) who annulled the same---Tax department filed appeal before Appellate Tribunal, which remanded the assessment back to the Assessing Officer for re-assessment---During re-assessment proceedings complainant filed (present) complaint before Federal Tax Ombudsman on 17-5-2012 on the basis of his apprehension that Tax Department was likely to repeat the same treatment accorded during the first assessment---Present complaint was filed on 17-5-2012 but it was registered on 23-5-2012---Re-assessment of complainant was shown by the Tax Department to have been made on 22-5-2012 i.e. a day before registration of present complaint---Tax Department contended that first assessment order was passed on 29-6-2009 , present complaint was filed on 17-5-2012 and registered on 23-5-2012 , therefore, same was late in terms of the time limitation laid down in S. 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Re-assessment finalized on 22-5-2012 was nothing but a repeat performance of the first assessment finalized on 29-6-2009 and as the two events were interlinked the present complaint covered both---Complainant filed an appeal before the Commissioner (appeals) who annulled the first assessment---Tax Department then filed appeal before the Appellate Tribunal that resulted in remand of the case for re-assessment---Complaint was not filed earlier before the Federal Tax Ombudsman as the complainant had received relief from the Commissioner (appeals) when he annulled the first assessment dated 29-6-2009, but when the complainant realized that the Department was likely to repeat the earlier assessment he had no option but to file present complaint in which a specific request was made that the Department be asked to stay re-assessment till disposal of complaint---Present complaint was filed on 17-5-2012 and the Department finalized the re-assessment on 22-5-2012, before the complaint was even registered in the Federal Tax Ombudsman office on 23-5-2012, therefore present complaint covered both the first assessment made on 29-6-2009 as well as the second re-assessment finalized on 22-5-2012 and given the sequence of events, there was no delay in filing the complaint in terms of the limitation given in S. 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S.122(1)--- Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Complaint against illegal assessment and re-assessment of tax---Sources of investment presented by complainant ignored by Assessing Officer---Maladministration---Effect---Complainant, who was the owner of flour mills, was assessed to tax for the Tax Year 2008 under S. 122(1) of Income Tax Ordinance, 2001 but contested such assessment before Commissioner (appeals) who annulled the same---Tax department filed appeal before Appellate Tribunal, which remanded the assessment back to the Assessing Officer with a direction to properly appraise the evidence, including bank statements---During re-assessment proceedings complainant filed complaint before Federal Tax Ombudsman on the basis of the apprehension that Tax Department was likely to repeat the treatment accorded in the first assessment as his explanation regarding his sources of investment in the flour mills was ignored and an adverse inference was drawn against him---Regarding his sources of investment in the flour mills complainant contended that such investment was contrived from drawings he had made from a loan account and from certain foreign remittances, which were ignored by the Assessing Officer, and that demand notice was served on him repeating the same treatment accorded to him in the first assessment, ignoring the directions of the Appellate Tribunal---Validity---Complainant filed a Return of Income for Tax Year 2007 along with a revised wealth statement as on 30-6-2007 and a wealth reconciliation statement---Revised Return of Income was also filed for Tax Year 2008---Said documents on record made it evident that the complainant did not make the investment in question in the income year relevant to Tax Year 2008---Ignoring specific direction of the Appellate Tribunal, the loan account had not been put to scrutiny objectively and Assessing Officer had arbitrarily rejected the funds available therefrom to the complainant as a source of investment---Assessing Officer had also failed to objectively appraise the complainant's sources of investment through foreign remittances---Failure of Assessing Officer to objectively appraise the complainant's sources of investment contrived against drawings from loan account and foreign remittances was tantamount to inefficiency and arbitrariness and fell well within the definition of maladministration as given in S. 2(3) of the Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was directed to direct the Commissioner to enquire into and submit a report on the Assessing Officer's failure to implement the Appellate Tribunal's directions, and further to exercise revisionary jurisdiction under S.122A of the Income Tax Ordinance, 2001 and finalize assessment for Tax Year 2008, de novo, in accordance with the directions of the Appellate Tribunal.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi, Advocate Authorized Representative.

Muhammad Farooq Anwar, ACIR Departmental Representative.

2013 P T D 232

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD UMER FAROOQ

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No.572/LHR/IT(423)/1073 of 2012, decided on 6th November, 2012.

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

----S.122(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Audit of return not formally selected by competent authority---Effect---Such audit being contrary to law would tantamount to maladministration.

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

----S.122(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Audit of return, finalization of---Protracted delay---Effect---Such delay would tantamount to maladministration.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi, Authorized Representative.

Waqas Ahmad, ACIR, Departmental Representative.

2013 P T D 243

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Syed GHAZANFAR ALI SHERAZI

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No.501/LHR/IT(374)/961 of 2012, decided on 5th November, 2012.

(a) Civil Procedure Code (V of 1908)---

----O.XLI, R.23---Remand order---Effect---Such order would determine parameters of subsequent adjudication.

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

----S.2(3)---Maladministration---Scope---Ex parte order by tax authorities, passing of---Validity---Failure to pass a judicious order and passing of repetitive ex parte order without proof of service of notice upon assessee for being arbitrary would tantamount to maladministration.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi, Authorized Representative.

Ms. Fauzia Adil, DCIR and Talat Chaudhry, DCIR Departmental Representatives.

2013 P T D 301

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

AIMAN RAMSHA EMBROIDERS (PVT.) LTD., SHEIKHUPURA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 698/LHR/ST(147)/1239 of 2012, decided on 26th November, 2012.

Sales Tax Act (VII of 1990)---

----Ss.14, 33 & 34---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Registration---Complainant/company was successor concern to "Association of Persons" by the same name---Registration of sales tax was refused on the ground that it was already registered for sales tax purposes and it had status of non-filer; and directed that missing sales tax returns be filed along with penalty @ Rs.5000 for each month of default as well as default surcharge---Complainant clarified that cited Sales Tax Registration Number was that of the predecessor "Association of Persons" and not that of the successor company and that the predecessor "Association of Persons" not having done any business since 30-6-2008 was not required to file sales tax returns for the subsequent period; and as a matter of caution, 'Nil' returns were filed but sales tax registration number was not issued---Revenue contended that Directors in the company were also partners in the "Association of Persons" by the same name; that "Association of Persons", an existing registered sales tax person, did not file sales tax returns after 30-6-2008 and was directed to file missing returns and also pay penalty assessed at Rs.5000 for each month the default lasted; that returns were filed but penalty or default surcharge were not paid; and that being pending full compliance of its directions by the "Association of Persons" the Department did not issue Sales Tax Registration Number to the company/complainant---Validity---Department did not issue Sales Tax Registration Number to the company only because the defunct "Association of Persons" by the same name as the company did not pay penalty and default surcharge for sales tax periods for which returns were filed belatedly---Under the law, complainant was a distinct corporate entity quite apart from the defunct predecessor "Association of Persons" and could not be denied as Sales Tax Registration Number as it needed the same in order to be able to import machinery for its own use---Denial of the same had prevented the company from importing machinery and conducting its business effectively---Department must deal with the defunct "Association of Persons" separately---Saddling it with sales tax liability by way of penalties and default surcharge when it was evident that it did not transact any business after 30-6-2008 and made no taxable sales and also filed "Nil" Sales Tax Returns during the period 2008 to 2012 was arbitrary and oppressive---Delay in issuance of Sales Tax Registration Number to the complainant company was tantamount to maladministration---Federal Tax Ombudsman recommended Federal Board of Revenue to allow Sales Tax/Federal Excise Duty registration to the complainant company in accordance with law.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi, Advocate Authorized Representative.

Ashfaq Ahmad, DCIR Departmental Representative.

2013 P T D 324

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

USMAN MAJEED CHOHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.585/LHR/IT(435)/1086 of 2012, decided on 31st October, 2012.

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

----Ss.121, 115(3)(b) & 114(1)(vi)---Best judgment assessment---Purchase of motor vehicle---Non compliance of notice under S.114 of the Income Tax Ordinance, 2001---Ex parte assessment---Taxpayer contended that he being an orphan and below 25 years in age at the time of acquisition of motor vehicle, was not required to file return of income; and Assessing Officer unjustifiably ignored the statutory stipulation and illegally finalized assessment---Validity---Amendment in S.114(1)(vi) of the Income Tax Ordinance, 2001 required all owners of motor vehicles of 1000cc engine capacity and above to file a return of income was introduced through Finance Act, 2009 and became effective from tax year 2010 whereas the taxpayer purchased the motor vehicle in tax year 2009---Further, complainant being an orphan and less than 25 years of age on the date the motor vehicle was purchased enjoyed exemption from filing the return---Complainant was not required to file a return for tax year 2009 as he enjoyed exemption under S.115(3)(b) of the Income Tax Ordinance, 2001---Amendment in S.114(1)(vi) of the Income Tax Ordinance, 2001 was brought on the statute through Finance Act, 2009 and became effective from tax year 2010---Complainant was not required to file a return in tax year 2009---Complainant was also not allowed reasonable time to respond to statutory notices---Invocation of S.121 of the Income Tax Ordinance, 2001 being against the statute and contrary to law 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 Commissioner to invoke revisionary jurisdiction under S.122A of the Income Tax Ordinance, 2001, and decide matter afresh, as per law, after hearing the complainant.

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

----S. 2(3)---Maladministration---Opportunity of being heard---Complainant contended that he was not given reasonable time to respond to notices served on him as Federal Board of Revenue Circular/Instructions stipulated that at least 15 days be allowed for compliance whereas he was given only 12 days---Validity---Department failed to allow reasonable time to the complainant to respond to statutory notices which tantamounted to maladministration.

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

----Ss.9 & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---When maladministration was present, the Federal Tax Ombudsman exercised concurrent jurisdiction.

Writ Petition No.11545 of 2012 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Muhammad Qaswar Hussain, DCIR Departmental Representative.

2013 P T D 350

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ABDUL RASHEED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.225/LHR/IT(166)441 of 2012.

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

----Ss.121, 122A & 122(5A)---Best judgment assessment---Opportunity of being heard---Complainant contended that ex parte action under S.121 of the Income Tax Ordinance, 2001 was against law as he was not accorded proper opportunity to explain the issues; that Assessing Officer being posted in Audit Zone did not have jurisdiction to amend deemed assessment; and that information relied on to amend the deemed assessment regarding investment made in two motor vehicles did not qualify as "definite information"---Validity---Ex parte assessment had been made on misplaced reliance which was patently defective information as the complainant did not own either of the two motor vehicles---Only one motor vehicle had been acquired on lease under a Hire Purchase Agreement with a bank and the complainant had debited his profit and loss account appended with the return for tax year 2010 with the expenses incidental to the arrangement---Evidently neither of the two motor vehicles referred to by the Department in the assessment order passed under S.121 of the Income Tax Ordinance, 2001 constituted tax payer's property in tax year 2010---Department had brought forth no evidence to establish his ownership of the other vehicle cited in the assessment order---Decision to consider a Hire Purchase Agreement as purchase of a vehicle, and treat the purchase of second vehicle as such, without any documentary basis, was perverse, arbitrary and unreasonable and was tantamount to maladministration---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Commissioner to revise the assessment order, as per law, invoking S.122A of the Income Tax Ordinance, 2001.

2012 PTD (Trib.) 170 ref.

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

----S.9(2)(a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Department contended that complainant had filed an appeal that was pending before First Appellate Authority and complaint could not be taken up for investigation---Validity---Complainant filed complaint before Federal Tax Ombudsman on 3-4-2012 whereas he approached the First Appellate Authority on 9-4-2012---No appeal before First Appellate Authority was pending on the day the complaint was filed before the Federal Tax Ombudsman.

(c) 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---Department contended that complaint fell outside the jurisdiction of Federal Tax Ombudsman as the same pertained to assessment proceedings and involveld interpretation of law---Validity---Assessment per se was not a moot point before Federal Tax Ombudsman and nor was any interpretation of law involved in the complaint---Complaint was maintainable in circumstances.

No.178 of 2005-Law (FTO) dated 26-5-2006 distinguished.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Muhammad Saeed Ansari, DCIR Departmental Representative.

2013 P T D 412

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ECONOMY PESTICIDES CHOTI ZAREEN, DERA GHAZI KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.683/LHR/ST/(139)/1217 of 2012, decided on 11th September, 2012.

Sales Tax Act (VII of 1990)---

----Ss.7 & 45A---Determination of tax liability---Adjustment of input tax against purchases---According to information available with Federal Board of Revenue, such purchases were not declared in the sales tax return of the supplier---Bank statement and copies of cheques/ demand drafts/pay orders were provided in response to show-cause notice and claimed that payment to supplier was made through bank in terms of S.73 of the Sales Tax Act, 1990---Clearance of cheques was not reflected in the bank statement---Complainant was required to provide sales tax return of the supplier, which he did not do---Order-in-original was passed for payment of tax along with penalty---Complainant contended that valid invoices were issued by the supplier and the payment was made through bank; that bank statement and copies of invoices were not considered on merits; that requirement to produce sales tax return of the supplier was uncalled for; that such document ought to have been obtained directly from the supplier instead of compelling the complainant; and that orders-in-original were passed without considering the evidence or going for independent verification, which was tantamount to maladministration---Validity---Inland Revenue Officer observed that cheques/demand drafts/pay order were not reflected in the bank statement---Taxation Officer should have verified the transactions directly from the bank which had not been done---No verification of purchases was made from the supplier and instead order-in-original was passed arbitrarily---Such act of passing orders-in-original was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Chief Commissioner to invoke jurisdiction under S.45A of the Sales Tax Act, 1990, to pass a fresh speaking order, as per law.

Haji Ahmad, Advisor Dealing Officer.

Sh. Ghulam Asghar for Authorized Representative.

Saleem Akhtar, DCIR Departmental Representative.

2013 P T D 418

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

BEST PAPER AND BOARD MILLS, GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 696/LHR/ST/(145)/1237 of 2012, decided on 13th September, 2012.

Sales Tax Act (VII of 1990)---

----Ss.2(37), 36 & 73---Tax fraud---Harassment by the Directorate of Intelligence and Investigation for payment of tax, without determination of liability under the law---Complainant contended that no coercive measures could be effected prior to adjudication of liability by the adjudicating authority holding jurisdiction in the case; and prayed that Department be ordered to determine the liability as per law, after providing opportunity of hearing---Validity---Directorate of Intelligence and Investigation could conduct inquiry about the fake and fictitious invoices and any fraudulent practices, but it was beyond their jurisdiction to adjudicate the tax demand---Adjudicating authority as per law, was to adjudicate after providing opportunity to the taxpayer---Taxpayer could not be compelled to pay tax before completion of the process of adjudication---Coercive recovery of tax without any determination of tax liability, being contrary to law, was tantanmount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Chief Commissioner to (i) determine the complainant's tax liability, as per law, after observing due process and (ii) adjust the tax liability so determined against cheque.

Haji Ahmad, Advisor Dealing Officer.

Kamran Khalil, Authorized Representative.

Ijlal Khan, Deputy Director and Muhammad Imran, Assistant Director Departmental Representative.

2013 P T D 433

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ALI SHAN ENTERPRISES, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.438/KHI/CUST(164)/1383 of 2012, decided on 19th October, 2012.

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

----S. 10(3)---Complainant---Condonation of delay---Special circum-stance---Theft of the pay order from; the custody of customs department; its encashment by another person; inaction by department; delay and negligence of the Department in circumstances, were certainly special circumstances justifying entertaining of the complaint in the interest of justice---Delay was condoned by the Federal Tax Ombudsman.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Objection about matter being sub-judice before the Special Judge was found to be without any substance as no matter about claim of the complainant for release/refund of pay order was sub-judice before any court, forum or authority---Objection was overruled by the Federal Tax Ombudsman.

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

----S.81---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Provisional determination of liability---Goods were released provisionally on payment of duty and taxes on declared value---Differential amount was secured through pay order which was required to be released on final determination of value and payment of due amount of duty and taxes---Despite payment of duty and taxes as per final assessment the security/pay order was not released as it was allegedly stolen from the custody of the Department and encashed with the connivance of the officials of the Department---Pay order was in the name of Collector and it could have been credited only to the official/Government account---Registration of First Information Report against theft of the pay order and a departmental inquiry were not enough---Officials involved in the theft, after being suspended for a short term, had been re-instated---No action had been taken for the recovery of the amount of pay order illegally en-cashed---Complainant was entitled to the release of pay order, after payment of due duty and taxes---Department was under legal obligation to return the pay order or refund the amount---Complainant could not be deprived of his legitimate money for the fault of the Department---Inaction, delay, inefficiency and ineptitude in discharge of duties and responsibilities on the part of Department were apparent on the face of record and were tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Collector to (i) finalize the departmental inquiry without further delay (ii) take steps, as per law, for the recovery of the defalcated amount and (iii) refund the amount of pay order to the complainant.

M. Nadir Khan, Advisor Dealing Officer.

Ahmed Danish, Authorized Representative.

Muhammad Qasim Khokar, DC and Ali Shah, AC Departmental Representatives.

2013 P T D 534

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

BASHIR PRINTING INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.825/LHR/ST/(188)/1431 of 2012, decided on 31st December, 2012.

Sales Tax Act (VII of 1990)---

----S. 66---Sales Tax Rules 2006, R.38 (3)---Refund to be claimed within one year---Refund was allowed by the Appellate Tribunal by accepting appeal---After filing refund application under S.66 of the Sales Tax Act, 1990, reminders were sent but refund was not issued within the time prescribed under law---Department contended that claims involving refund were pending due to STARR objections; and supportive documents such as invoice summary, evidence of payment and bank statement required for removing STARR objections were not filed along with refund claim; that claims were not made in accordance with the provisions of S.66 of the Sales Tax Act, 1990, read with Refund Rule 38(3) of the Sales Tax Rules, 2006; that claims under S.66 of the Sales Tax Act, 1990 could not be sanctioned merely on the basis of order-in-original; that documentary evidence was essential for processing the claim; that the taxpayer was required to provide details of pending refunds along with supportive documents; and that Taxpayer provided documents, on receipt of documents, the claims were restored in the system, and the process of verification initiated---Validity---Department could not show that Commissioner was prevented by sufficient cause to decide the refund claim within the prescribed time nor could he give any cogent reason as to why non-submission of evidence/documents was not conveyed by the Department immediately on receipt of refund application; and assured that refund due would be issued as soon as the verification was completed---Department denied the compensation as the refunds were created and claimed under S.66 of the Sales Tax Act, 1990, as a result of orders of Appellate Tribunal---Order passes by the Appellate Tribunal had not been implemented---Denial of compensation for no fault of the taxpayer was both unfair and unreasonable---Delay in disposal of refund claims was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Chief Commissioner to sanction refund/compensation due, as per law.

Haji Ahmad, Advisor Dealing Officer.

Khubaib Ahmad Authorized Representative.

Syed Azhar Abas Sherazi, ACIR Departmental Representative.

2013 P T D 929

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs DATA STEEL PIPE INDUSTRIES (PVT.) LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No. 79/KHI/ST(30)238 of 2012, decided on 7th May, 2012.

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---Federal Board of Revenue stated that committee had not furnished its recommendations within the stipulated period of 90 days as provided under S.47A(3) of the Sales Tax Act, 1990, a fresh Alternative Dispute Resolution Committee was in the process of constitution and an intimation in this regard would be communicated to the complainant in due course---Validity---It was imperative for the Committee to give its recommendations within 90 days---Federal Board of Revenue on 8-12-2009 asked the same Committee to re-examine certain issues---Committee submitted its fresh recommendations on 16-3-2011 i.e. a year and ninety eight days after the second reference---Board should have called for appropriate disciplinary action against the members of the Committee, particularly the departmental member, but there was nothing on record to show that the Federal Board of Revenue took necessary steps to address the issue, nor did the Federal Board of Revenue appear to have taken any action against the members of the Committee for submitting a report containing recommendations which according to the Commissioner, were not based on facts and were contrary to law---Federal Board of Revenue further failed to pass appropriate orders within 45 days of receipt of the final recommendations---Instead, after keeping the file for more than 11 months, the Federal Board of Revenue called for a report from the Chief Commissioner vide letter dated 7-2-2012---Federal Board of Revenue manifestly violated the provisions of S.47A(4) of the Sales Tax Act, 1990 by not passing orders within the mandatory period of 45 days of receipt of the recommendations---Inordinate delay in passing order on the unanimous recommendations dated 16-3-2011 of the Committee had been established which was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to pass orders, as per law, on the recommendations of the Committee under subsection (4) of S.47A of the Sales Tax Act, 1990, if the Federal Board of Revenue was of the opinion that recommendations of Committee were not based on facts and were contrary to law, then appropriate disciplinary action must be initiated against members of the Committee.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Muhammad Afzal Awan Authorized Representative.

Abdul Hameed Shaikh, DCIR and Mirza Nasir Ali, DCIR Departmental Representatives.

2013 P T D 933

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SECRETARY, REVENUE DIVISION, ISLAMABAD

Versus

Messrs DATA STEEL PIPE INDUSTRIES (PVT.) LIMITED, KARACHI

Review Application No.50 of 2012 in Complaint No.79/KH/ST(30)/238 of 2012, decided on 25th February, 2013.

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---Initiation of disciplinary proceedings was recommended by the Federal Tax Ombudsman against members of Alternative Dispute Resolution Committee---Revenue contended that disciplinary proceedings could not be initiated against the member of the committee and committee could be constituted afresh to decide the matter after thorough deliberation of the issues---Validity---Orders-in-Original was passed on 27-5-2007 and Alternative Dispute Resolution Committee formed on 18-11-2008---Report of Committee was given to the Federal Board of Revenue on 30-9-2009 i.e. after 323 days instead of the stipulated 90 days---Federal Board of Revenue was required to dissolve the Committee for failure to submit its report within the prescribed period, it failed to do so---Even after receipt of report the Federal Board of Revenue was required to reconstitute a fresh Committee within 90 days---Instead the Committee was constituted on 15-10-2012; this was done with a delay of over three years---Alternative Dispute Resolution Committee had still to give its fresh recommendations, in the meanwhile the Appellate Tribunal had decided the matter, separately referred to it---Complainant may be satisfied at this point of time but the neglect, inattention, delay, incompetence, inefficiency and ineptitude in the discharge of duties and responsibilities was manifest at various levels of tax officials during the complete chain of events---Method devised for the facility of the taxpayer was converted into a torture rack moving inch by inch---No ground existed that could be urged for the review of the decision---Maladministration at all levels, that were entrusted with the provision of due process, expeditious disposal and relief to a taxpayer, was manifest---Federal Board of Revenue need to address the matter as a systemic issue---Apart from setting its own house in order, if any Alternative Dispute Resolution Committee members were not inclined to follow the law, they should not be restored for such work---Case was closed by the Federal Tax Ombudsman.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Fazal Abrejo, Commissioner, IR for Applicant.

Muhammad Afzal Awan for Respondent.

2013 P T D 1293

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT, TAX RESOLUTION SERVICES COMPANY, LAHORE

Versus

CHAIRMAN, F.B.R., and 2 others

Complaint No.1015 of 2012, decided on 8th January, 2013.

Freedom of Information Ordinance (XCVI of 2002)---

----Ss. 3, 8, 10, 15, 16, 17, 18 & 19(2)---Income Tax Ordinance (XLIX of 2001), S.216---Constitution of Pakistan, Art.19-A---Refusal to provide requested information---Commissioner Inland Revenue refused to provide the requester/complainant information pertaining to specific aspects of the Federal Board of Revenue's working---Commissioner had declined to provide requested information, contending that under S.216(1) of Income Tax Ordinance, 2001, such information being confidential could not be disclosed---Validity---Freedom of Information Ordinance, 2002, enabled citizens to ask for publicly held information as a matter of right and enabled citizens to have access to public records---Purpose of the said Ordinance was to ensure transparency and promote good governance by making the Government more accountable and open and was meant to make Government more efficient and citizen friendly delivering public services---Access to information was a sine qua non for a constitutional democracy---Public had a right to know everything done by the Public Functionaries, subject to any restriction imposed by law---In the present case, the data/documents requested by the requester did not fall within any of the exemptions provided under Freedom of Information Ordinance, 2002---No exemption could be claimed on the basis of any other law---Provisions of the Freedom of Information Ordinance, 2002 also had overriding effect over the provisions of Income Tax Ordinance, 2001 as given in its S.3 (a non obstante provision)---Article 19-A of the Constitution enshrined the right to information as a Fundamental Right, subject to regulation and reasonable restriction---Authorities were bound to disclose information requested by the requester---Federal Tax Ombudsman directed that, Federal Board of Revenue would ensure that the provisions of the Freedom of Information Ordinance, 2002, were implemented in letter and spirit and with minimum delay; that Board would collate the requisite data and forward a consolidated report to the requester; that Board would appoint a "designated official" under S.10 of Freedom of Information Ordinance, 2002, if not already done and that submit compliance report within 30 days.

2013 P T D 1331

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs IMPEX AGENCIES, KARACHI

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complainants Nos. 04/ISD/CUS(01)/208, 05/ISD/CUS(02)/209 and 11/ISD/CUS(04)/309 of 2013, decided on 6th May, 2013.

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

----S.9---National Tariff Commission Act, 1990 (VI of 1990), S.4---Federal Tax Ombudsman, jurisdiction of---Complaint against imposition of Anti-Dumping and Countervailing Duties by the National Tariff Commission---Maintainability---Held that, such complaint was not maintainable as the scope of work of the National Tariff Commission fell within the domain of the Ministry of Commerce, and the same was not working under the Revenue Division, and jurisdiction of such issues apparently lay with the Federal Ombudsman (Wafaqi Mohtasib)---Complaints were dismissed.

Sardar Irshad Shaheen, Advisor Dealing Officer.

Muhammad Afzal Awan for Authorized Representative.

Iftikhar Ahmad, Additional Collector Departmental Representative.

2013 P T D 1393

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs QUAID-E-AZAM MEDICAL COLLEGE, BAHAWALPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.9/Khi/Cust/(07)/21 of 2013, decided on 29th April, 2013.

Customs Act (IV of 1969)---

----Ss. 19 & 80---Establishment of Office of the Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Refusal to allow exemption of duty and taxes---Maladministration---Complainant which imported 'bed-lifts' for hospital, filed goods declaration under PCT 9914 which allowed exemptions to hospital from duty and taxes on import of such equipments, and claimed exemption---Federal Board of Revenue, refused exemption on the ground that 'lifts' imported by the complainant was 'passenger lifts' which fell under PCT Heading 8428.1010, and not under PCT Heading 9914 allowing duty from import of equipment---Refusal of Federal Board of Revenue allow exemption, prima facie, was based on the report received from the department, but it did not state any reason for not allowing exemptions claimed by the complainant---Complainant had also filed a copy of other goods declaration, whereby 'Passenger lifts' imported by the Institution of Cardiology, were allowed exemption---Those were specified as 'bed-lifts' as those were for the use of patients---Case of the complainant was on a better footing, but that aspect was not considered, resulting in discriminatory treatment to the complainant---Refusal of exemption by Federal Board of Revenue, without application of mind, without any just reason and being discretionary in nature, was tantamount to maladministration---Federal Board of Revenue, was directed to reconsider the issue in accordance with law, after affording opportunity of hearing to complainant, and to report compliance within 30 days.

M. Nadir Khan, Advisor Dealing Officer.

M. Adeel Awan for Authorized Representative.

Zainab Mehmood, Assistant Collector Departmental Representative.

2013 P T D 1545

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs LOTTE PAKISTAN (PTA) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 19/KHI/ST (03)/56 of 2013, decided on 2nd May, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), 7(1) & 10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund claim---Complainant filed refund claim under S.10 of Sales Tax Act, 1990 duly supported by complete copies of invoice of paid challans---Department deferred said claim without giving any cogent justification---Federal Board of Revenue, had failed to work out appropriate "modus operandi" for input tax adjustment in respect of Provincial Sales Tax on services collected by the service providers, assessed with Sindh Revenue Board which had led to inordinate delay, neglect, inattention, incompetence and inefficiency in the discharge of duties and responsibilities on the part of Federal Board of Revenue, which being a systemic issue needed to be addressed on priority basis---Inordinate delay on the part of Federal Board of Revenue to devise modalities for setting Sales Tax adjustment claims of the taxpayers, 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 provide database linkage as mutually agreed between Sindh Revenue Board and Federal Board of Revenue as to resolve the systemic issue; to direct the Chief Commissioner to process and settle the complainant's claims, as per law and report compliance within 30 days.

Manzoor Hussain Kureshi, Advisor Dealing Officer.

Dr. M. Farogh Naseem, Ghulamullah, Abdul Wasey Samdani, CFO and M. Hanif Shaikh, FCA Authorized Representatives.

Mirza Nasir Ali, DCIR, Departmental Representative.

2013 P T D 1702

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

EAGLE ENGINEERING WORKS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.81/LHR/ST/(12)/153 of 2013, decided on 24th May, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 34(1)(c) & 33(13)---S.R.O.666(I)/2012, dated 1-6-2012---S.R.O.774(I)/2012, dated 27-6-2012---Additional tax and penalties---Amnesty Scheme---Adjustment of input tax claimed unlawfully against invoices issued by blacklisted suppliers---During adjudication proceed-ings, sales tax due was deposited---Order-in-original was passed, wherein taxpayer was required to deposit default surcharge and penalty---Notices were issued for recovery of default surcharge, but the same could not be recovered---Meanwhile, Federal Board of Revenue announced amnesty and allowed exemption of the whole amount of default surcharge and penalty payable by a person who had illegally adjusted input tax---Taxpayer applied for the waiver of additional tax and penalty and requested to drop the recovery proceedings on the ground that principal amount of sales tax had already been paid---Revenue contended that taxpayer deposited the principal amount of tax prior to the issuance of both S.R.Os., the taxpayer was not entitled to claim exemption/waiver and effect of a notifications and S.R.O. was pros-pective and not retrospective---Validity---Taxpayer having paid sales tax before the announcement of amnesty scheme could not be punished by depriving him of the benefit available under the S.R.Os.---Denial of the benefit to the taxpayer would indeed be discriminatory---Notification which was beneficial to a person could operate retrospectively---Delay in disposal of application was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to dispose of the taxpayer's application as per law.

2006 PTD 336 rel.

Haji Ahmad, Advisor Dealing Officer.

M. Wasim Ch., Authorized Representative.

Faisal Asghar, DCIR Departmental Representative.

2013 P T D 1770

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SECCO PAK (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.293/LHR/ST(62)/488 of 2013, decided on 3rd July, 2013.

Sales Tax Act (VII of 1990)---

----Ss.10 & 67---S.R.O. 549(I)/2008 dated 11-6-2008, S.Nos.3 & 7---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Refund of input tax---Appellate Tribunal held unequivocally that refund of input tax was due to the taxpayer and should be paid---Department had held back on issuance of the refund due---Department contended that reference had been filed against the order of Appellate Tribunal before the High Court, no stay against order of the Appellate Tribunal had been granted; and legal issues / law points arising from the judgment of Appellate Tribunal needed to be resolved, before taking up the refund issue---Validity---Reference before the High Court against the Appellate Tribunal's order could not act as a bar against disbursement of input tax refund due to the taxpayer---Delay in issuance of refund as a consequence of giving appeal effect to the order of Appellate Tribunal was tantamount to maladministration---Delay also created the right to receive compensation under S.67 of the Sales Tax Act, 1990---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Commissioner to decide refund/compensation due, in accordance with law, without prejudice to the outcome of proceedings before the High Court.

Complaint Nos.1272-K of 2007 and 1274 of 2007; Representation No.52/08-Law (FTO) and No.53/08-Law (FTO) dated 27-5-2009 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Hussain Ahmad Sherazi Authorized Representative.

Muhammad Ali, DCIR Departmental Representative.

2013 P T D 1967

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD JAVED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.55/LHR/IT(41)/105 of 2013, decided on 10th July, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 116, 120(1), 121, 122(1)(5), 176 & 214-C---Complaint to Federal Tax Ombudsman---Notice issued by Assessing Officer requiring complainant to explain sources of investment in commercial property and file wealth statement for relevant year along with a wealth reconciliation statement---Complainant's plea was that after having identified his sources of investment through documents, Assessing Officer could not require him to file wealth statement in absence of selection of his deemed/finalized assessment for audit by Federal Board of Revenue---Validity---Assessing Officer in case of a finalized assessment after receipt of "definite information" about an investment could ask an assessee to explain its sources, and in case of his failure to do so could amend finalized assessment after issuing him show cause notice under S. 122(5) of Income Tax Ordinance, 2001---Assessing Officer had not objected sources of investments identified by complainant for being documentary foreign remittances---Neither Assessing Officer had revised/amended complainant's deemed assessment nor had Board selected same for audit---Impugned notice was without jurisdiction---Ombudsman directed Chief Commissioner to restrain Assessing Officer from conducting an audit in garb of a probe into already such accepted sources of investment or select complainant's case for audit.

2001 SCMR 838 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi Authorized Representative.

Murtaza Ali Akbar, ACIR Departmental Representative.

2013 P T D (Trib.) 2159

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SECRETARY REVENUE DIVISION, ISLAMABAD

Versus

WAHEED SHAHZAD BUTT, ADVOCATE HIGH COURT

Complaint No.286/LH R/IT (240)/577 of 2011, decided on 10th July, 2013.

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

----S. 9(1)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---"Public interest"---Suo motu notice in public interest by ombudsman---Necessity of complaint---Objection of the Department that "Federal Tax Ombudsman could only assume jurisdiction if there was an aggrieved party", was misconceived---Allegations of systemic maladministration were levelled against the functionaries of Federal Board of Revenue and the Federal Tax Ombudsman took suo motu notice in public interest, under S.9(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Investigation of the nature did not necessitate a complainant.

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

----S. 2(3)---Maladministration---Department contended that in the absence of mens rea in the conduct of functionaries of Federal Board of Revenue, no disciplinary action was warranted against them---Validity---Mens rea in proceedings before the Federal Tax Ombudsman was determined by the attendant circumstances on the basis of balance of probability and not on the basis of requirement of criminal law beyond reasonable doubt---Chain of transactions which could result in loss of billions of rupees to the exchequer and a corresponding gain to the service provider corporations could not be brushed aside as a bona fide error of judgment.

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

----Ss.153 (1)(b), 153(6)(iii), 113 & 206---FBR Circular No.6 of 2009 dated 18-8-2009---FBR Circular C.No.196 WHT/2009 dated 4-7-2009---FBR Circular No.3 of 2009 dated 17-7-2009---S.R.O. 1003(I)/2001 dated 31-10-2011---Payments for goods, services and contracts---Tax on services---Minimum tax for service sector, corporate as well as non-corporate---Minimum tax under Ss.153(1)(b)/153(6) of the Income Tax Ordinance, 2001, and after Finance Act, 2001, Ss.153(1)(b)/153(3)(b) of the Income Tax Ordinance, 2001, was applicable in cases of all service sector taxpayers, corporate as well as non corporate---FBR Circular No.6 of 2009 dated 18-8-2009 was based on wrong and possibly motivated view of the law pertaining to minimum taxation under S.153 of the Income Tax Ordinance, 2001---FBR Circular No.3 dated 17-7-2009 was issued soon after the changes in S.153 of the Income Tax Ordinance, 2001 were brought after enactment of Finance Act, 2009 under which 6% minimum tax was made applicable to all taxpayers rendering services---Three illustrations provided in Circular No.3 covered corporate as well as non-corporate taxpayers, wherein 6% tax deducted under S.153(1)(b) of the Income Tax Ordinance, 2001 was specifically categorized as minimum tax---Nothing was mentioned in Circular No.3 which had hinted, however obliquely, at exclusion of the corporate sector from the purview of minimum taxation---Minimum taxation of all service sector taxpayers was again re-affirmed in FBR Circular No.7 of 2001 when S.153 of the Income Tax Ordinance, 2001 was re-cast, re-aligned and re-drafted to make it more comprehensible and easy to understand---Earlier, Federal Board of Revenue through C.No.1(25)WHT/2009 dated 26-4-2011 superseded Circular No.6 and clarified that 6% minimum tax applied to all taxpayers falling within the purview of S.153(1)(b) of the Income Tax Ordinance, 2001 and thereby admitted that the contrary view expressed in Circular No.6 of 2009 was wrong.

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

----Ss.153(1)(b) & 153(6)(iii)---FBR Circular No. 6 of 2009 dated 18-08-2009--Tax on services--Exemption certificate issued by commission for minimum tax---Interpretation of statutes was the exclusive prerogative of the courts---One may refer to the issuance of exemption certificates by the Commissioners of Income Tax to corporate entities, especially Cellular Companies, deriving receipts from rendering services after the changes were introduced in S.153 following enactment of Finance Act, 2009---Issue of such certificates was clearly illegal as after introduction of minimum taxation of all service providers through Finance Act, 2009, 6% tax withheld became the minimum tax below which there was no possible threshold---No possibility of refund of tax withheld at source existed on payments made to service providers and a corporate entity was bound to pay such minimum amount of tax---No justification existed for issuance of exemption certificates to corporate entities---When matter was brought to their attention, the Commissioner immediately cancelled the exemption certificates which evidently triggered a huge effort by the affected corporate entities who obviously wielded considerable clout in the Federal Board of Revenue---Circular No.6 of 2009 was issued after few days which "clarification" was expressly designed to take companies rendering services out of the purview of minimum taxation under Ss.153(1)(b)/153(6) of the Income Tax Ordinance, 2001---No greater indictment of a government agency charged with the mobilization of revenue desperately could be needed by the State than what it did by issuing Circular No.6 of 2009---After withdrawal of said Circular further clarifications/Statements/S.R.Os. were issued by the Federal Board of Revenue on 26-4-2011, 28-4-2011, 17-6-2011 and 1-7-2011---Secretary Inland Revenue, on 6-9-2011 confirmed that Circular No.6 was wrongly issued---Chief Income Tax Policy, also stated (during the hearing of the Review Application) that Circular No.6 of 2009 was unlawful and he had signed that Circular under pressure---All these admissions and clarifications notwithstanding, S.R.O. No. 1003 dated 31-10-2011 was issued to grant exemption to the corporate sector from minimum tax by inserting Cl.79 to Second Schedule of the Income Tax Ordinance, 2001---Federal Board of Revenue issued Circular No.6 of 2009 without mandate.

2010 PTR 1 and 1993 SCMR 1232 rel.

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

----Second Sched., Part-II, Cl.79 & S.153---FBR Circular No. 7 of 2011 dated 1-7-2011---S.R.O. 1003 dated 31-10-2011---S.R.O. 1003 dated 31-10-2011 was issued inserting Cl. 79 in the Second Schedule of Income tax Ordinance, 2001 without getting retrospective approval of the amendment in S.153 of the Income Tax Ordinance, 2001 by the Parliament through Finance Act, 2011---Only subsections of S.153 of the Income Tax Ordinance, 2001 were 'realigned to provide clarity without changing the taxation regime through Finance Act, 2011 as explained by Federal Board of Revenue itself in Para 19 of Circular No.7 of 2011 dated 1-7-2011---No approval of the Parliament had been sought through Finance Act, 2012 or Finance Act, 2013 for the purpose.

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

----Ss.153(1)(b), 153(6)(iii) & Second Sched., Part-II, Cl.79---FBR Circular No.6 of 2009 dated 18-8-2009---Payments for goods, services and contracts---Tax on services---Exemption to corporate sector service providers from minimum tax---Validity---Federal Board of Revenue acted beyond its jurisdiction exempting corporate sector service providers from minimum tax---Federal Board of Revenue's act of issuing Circular No.6 of 2009, and then inserting Cl. 79 in the Second Schedule to the Income Tax Ordinance, 2001 effectively amending the provisions of S.153 of the Income Tax Ordinance, 2001 without approval of the Parliament smacked of improper motive, as also inefficiency, incompetence and ineptitude---Federal Board of Revenue had no authority to issue S.R.Os./Circulars which contradict the statutory provisions of laws---As no amendment in S.153 of the Income Tax Ordinance, 2001 was approved by the Parliament, insertion of Cl.79 in the Second Schedule to the Income Tax Ordinance, 2001, changing the whole spirit of taxation regime, was clearly an act without jurisdiction---Bumpy and conflicting sequence of Circulars and S.R.Os. leading to insertion of Cl. 79 in the Second Schedule of the Income Tax Ordinance, 2001 through S.R.O. 1003 dated 31-10-2011 being wilful and mala fide came under the definition of "maladministration"---Review application was rejected by the Tax Ombudsman accordingly.

2010 PTR 1 and 1993 SCMR 1232 rel.

Muhammad Munir Qureshi, Advisor, for the Dealing Officer.

Waheed Shahzad Butt for the Authorized Representative.

Asrar Rauf, Senior Member, FBR, Dr. Muhammad Iqbal, Chief ITP, FBR, Aftab Ahmed, then Chief ITP, FBR, Taj Hamid, Secretary IR (Budget), FBR, Dr. Aftab Imam, Secretary, FBR, Khalid Aziz Banth, then Member DT for the Departmental Representatives.

Dr. Ikram ul Haq, Advocate Surpeme Court, Rana Munir Hussain, General Secretary-APTBA, Habib Fakhruudin, Ex-Member FBR Syed Pervaiz Amjad, Ex-Member FBR, for the Amici Curie

2013 P T D 2226

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

SOHAIL AMIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.240/LHR/ST(58)/408 of 2013, decided on 12th March, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 198 & 216---Assessment record of taxpayer---Illegal access to such record and theft of confidential data therefrom---Effect---Failure of department to ensure integrity of taxpayer's assessment would tantamount to maladministration and constitute data theft---Principles.

Maintaining confidentiality of all information contained in the assessment record of taxpayers is the responsibility of the concerned office of the Federal Board of Revenue where the manually filed data is store/maintained. Any person who in contravention of the provisions of Section 216 of Income Tax Ordinance, 2001 (the Ordinance) discloses any particulars borne on a taxpayer's assessment record is guilty of an offence under Section 198 of the Ordinance, which is punishable on conviction with fine or/and imprisonment for a term not exceeding six months. The provisions of Section 216 of the Ordinance cast a statutory responsibility on the FBR to ensure the integrity of a taxpayer's assessment record.

When the department fails to ensure the integrity of a taxpayer's assessment record, then this lapse tantamounts to maladministration as defined in section 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. The illegal access to taxpayer's assessment record also constitutes data theft under Section 216 of the Income Tax Ordinance, 2001.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Waheed Shahzad Butt for Authorized Representative.

Qadir Nawaz DCIR, Mujahid Naeem Senior Manager Automation (DT) PRAL, Zulfiqar Ali, DCIR, Uzair Ahmad, IRAO, Rashid Mehmood, Data Base Admin PRAL, Fakhar Abbas E-support Supervisor PRAL, Muhammad Aftab, Inspector Income Tax and Irfan Ahmad, IRAO Departmental Representatives.

2013 P T D 2341

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

NASEEM PLASTIC HOUSE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.303/LHR/ST/(67)/505 of 2013, decided on 12th July, 2013.

Sales Tax Act (VII of 1990)---

----Ss.47, 46 & 21---Suspension of Sales Tax Registration---Appellate Tribunal annulled the order of suspension, and directed to restore the registration---Appellate Tribunal also left it for the Department to proceed in accordance with law after issuing notice to the parties, if sufficient evidence was available that the taxpayer was involved in tax fraud and had adjusted input/output on fake invoices---Tax-payer applied for issuance of order for restoration of registration but to no avail---Revenue contended that Federal Tax Ombudsman had no jurisdiction to inquire into the mattes which were sub-judice before court of competent jurisdiction or Tribunal or Federal Board of Revenue or authority on the date of receipt of complaint; and as Department had filed a Reference before High Court, the implementation of order of Appellate Tribunal was to remain pending till decision by the High Court---Tax-payer contended that no stay, order or suspension order form High Court had been obtained by the Department; nor was there a provision in the Act granting automatic stay during the pendency of a case before a court of competent jurisdiction; and order of the Appellate Tribunal held the field, and the Department had no option other than restoring the registration---Validity---Federal Tax Ombudsman investigated acts of omission or commission of tax employees---Department misconceived that the Federal Tax Ombudsman had no jurisdiction to entertain the present complaint---Federal Tax Ombudsman could direct the Department to implement appellate orders, where no stay or suspension order was issued by a court of competent jurisdiction---Mere filing of appeal in a higher forum did not automatically suspend the judgment of a lower forum---Effect had to be given to the orders of the Appellate Tribunal in the absence of any order, staying the said order by the higher forums---Delay in implementing the order of Appellate Tribunal was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to issue appeal effect order and restore the registration, as per law within 21 days.

Order No.14/2007-Law(FTO) dated 31-1-2008 rel.

Haji Ahmad, Advisor Dealing Officer.

Khubaib Ahmad, Authorized Representative.

Dr. Rizwan Siddique, DCIR for Departmental Representative.

2013 P T D (Trib.) 4

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Amjad Ikram Ali, Accountant Member

Messrs GULBERG KABANA (PVT.) LTD., LAHORE

Versus

COLLECTOR SALES TAX, LAHORE and another

S.T.A. No.1085/LB of 2009, decided on 4th August, 2011.

Sales Tax Act (VII of 1990)---

----Ss.36(3), 11(4), 2(37), 3, 6, 7, 22, 23, 26, 33(2)(cc) & 34---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Taxpayer contended that show cause notice was issued on 12-4-2000 contrary to the provision contained in Ss.11(4) and 36(3) of the Sales Tax Act, 1990 as authorities were bound to pass order-in-original within 45 days of the issuance of notice; and if order, due to any reason, could not be passed, the officer of sales tax was bound to obtain extension within stipulated 90 days but the same had not been done; this fact was evident from order-in-original; and that order was barred by time had no value in the eyes of law and the same merited cancellation---Validity---After issuance of show cause notice, the Authority was legally bound to pass order-in-original within 45 days of the issuance of show cause notice and if for any reason, he failed to pass the order, then he was legally bound to seek extension for further period, which shall not in any case exceed 90 days and such extension must be in writing and the reasons for delay must be incorporated therein---Show-cause notice was issued on 12-4-2000 and the order-in-original was passed on 28-12-2006 while, time limitation of ninety days expired on 12-7-2000---Order-in-original was passed beyond the prescribed time limit of 45 days---Adjudicating Authority had neither fixed any extended period nor recovered any reasons for passing the order after 45 days---Appeal was accepted by the Appellate Tribunal declaring the order-in-original as time barred and nullity in the eyes of law---Appeal was decided only on the legal issue, appeal was accepted, order set aside and show cause notice was vacated.

2009 PTD 1978; 2009 PTD 762 and Super Asia Muhammad Din and Company v. Collector of Sales Tax 2008 PTD 60 rel.

2009 PTD 2004 and 2008 PTD 578 ref.

Customs and Sales Tax Appellate Tribunal vide Appeal No.154/ST/IB of 2005 distinguished.

Noman Mushtaq Awan for Appellant.

Dr. Shehryar, DR for Respondents.

Date of hearing: 30th July, 2011.

2013 P T D (Trib.) 10

[Inland Revenue Appellate Tribunal of Pakistan]

Before Mian Masood Ahmad, Accountant Member

Messrs MUHAMMAD SHARIF ZARGAR, GUJRANWALA

Versus

C.I.R. (APPEALS), GUJRANWALA

I.T.As. Nos.1182/LB to 1191/LB of 2011, decided on 10th May, 2012.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 65 & 13---Additional assessment---Definite information---Bank deposits---Estimation of sales---No adverse inference was drawn---Additions---Taxpayer contended that although assessments were reopened on the basis of maintenance of bank accounts, yet, at the end of the day the Assessing Officer could not draw an adverse inference regarding bank deposits; and having failed to draw an adverse inference, the Assessing Officer resorted to estimation of sales as Assessing Officer observed in his order that "no adverse inference is drawn as far as the source of deposit is concerned and no action being taken under S.13 of the Income Tax Ordinance, 1979"; that in the absence of any adverse inference to the grounds of reopening, the Assessing Officer should have dropped the proceedings instead of continuing; and that notices under S.65 of the Income Tax Ordinance, 1979 had not been lawfully issued, since the relevant clauses of the notices were not ticked which was the statutory requirement---Validity---After being satisfied with the genuineness of deposits in accounts, the Assessing Officer had no jurisdiction to proceed further under S.65 of the Income Tax Ordinance, 1979---No action under S.13 of the Income Tax Ordinance, 1979 appeared to have been taken with reference to deposits except in one year which was again on altogether different grounds---Issuance of notices and culmination of proceedings initiated was held to be void ab initio and illegal and all subsequent proceedings were without jurisdiction and liable to be quashed---Assessing Officer was bound to let the assessee know as to precise basis warranting reopening of his already completed assessment by ticking appropriate clause and striking off the remaining clauses---In the absence of any such exercise inference would be that Assessing Officer was himself not sure as to the basis of reopening---Irrefutable inference in such like situations was that the information being utilized by the Assessing Officer did not fulfil the conditions of being a "definite information"---Such defect alone was sufficient to declare the whole proceedings as void ab initio---Notice under S.65 of the Income Tax Ordinance, 1979 was held as having been issued without lawful jurisdiction for lack of "definite information"---All the subsequent proceedings and whole series of orders passed on the basis of such notice were not allowed to hold the field---Orders passed by the lower authorities were vacated as having been passed without lawful authority---Proceedings initiated and orders passed thereunder having been declared to be without lawful authority, imposition of penalty was to crumble down.

1997 PTD 47; 1997 PTD (Trib.) 1994; 2000 PTD (Trib.) 2531; 2011 PTD 2435; 2002 PTD (Trib.) 1337; 2009 PTD (Trib.) 1919; 2001 SCMR 838; 2001 PTD 480 (SC); 2004 PTD (Trib.) 1052; 2009 PTD (Trib.) 1963 and 2000 PTD (Trib.) 531 rel.

Shoaib Ahmed for Appellant.

Dr. Muhammad Idrees D.R. for Respondent.

Date of hearing: 10th January, 2012.

2013 P T D (Trib.) 87

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and

Zarina N. Zaidi, Accountant Member

Messrs MUHAMMAD YASEEN

Versus

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

I.T.As. Nos. 391/KB to 394/KB of 2012, decided on 25th July, 2012.

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

----Ss.210, 122(5A) & 120---Powers of Commissioner, delegation of---Amendment of assessments---Taxpayer contended that orders passed under S.120 of the Income Tax Ordinance, 2001 were deemed to be the order of the Commissioner and powers of revision could not be entrusted to any authority below the rank of functionary whose order was sought to be revised which in the present case was Additional Commissioner---Validity---Additional Commissioner under delegated authority could perform the functions and exercise the powers of the Commissioner with specific reference to S.122(5A) of the Income Tax Ordinance, 2001---Appeal was disposed of accordingly.

Writ Petition No.653 of 2009 dated 2-7-2001; Constitutional Petitions Nos.1664-1665 of 2009 dated 11-9-2009 and I.T.As. Nos. 393 and 270/KB of 2010 rel.

2010 PTD (Trib.) 472; 2006 SCMR 1410(a); 1995 PTD 641; 2001 PTD 2484/2258 and 2008 PTD 182 ref.

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

----S.122(5A)---Amendment of assessments---Amnesty Scheme---Limitation---Federal Board of Revenue, Circular No.3 of 2008 dated 1-7-2008---Taxpayer contended that declaration was filed on 30-10-2008 and the limitation provided was one month from the date of receipt of declaration; that he had acquired the amnesty; that condition laid down for taking any action by the department was one month which had expired on 30-11-2008; and after lapse of limitation the notice was issued on 13-1-2009, therefore, issuance of such notice after passing of limitation period was ab initio void and illegal---Validity---Federal Board of Revenue Circular No.3 of 2008 dated 1-7-2008 prescribed a time limit of one month to inform the declarant---Time limit of one month had been prescribed in the said circular for taking action---Declarations had been filed on 31-10-2008 and first notice was issued on 13-1-2009 after a lapse of more than one month---Very purpose of introduction of the scheme in question was to provide free passage to the taxpayer without asking any question and doors of investigation and probe had been closed---Circular in question itself stated that "Scheme of Invest Tax-2008 was a voluntary scheme through which government had reposed trust in the taxpayers", therefore all subsequent notices issued from time to time and indulging in investigation, probe, fishing/roving inquiry and pressuring taxpayer to file returns of income was tantamount to frustrating the very purpose of the scheme and as such, were without any lawful jurisdiction having no legal effect---Appeal was disposed of accordingly.

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

----Ss.122(5), 122(5A) & 122(9)---Amendment of assessments---Definite information---Scope---Initiation of proceedings on basis of past and closed information---Taxpayer contended that audit proceedings were illegally initiated on the basis of bank statement obtained from the bank; that Revenue authority was not in possession of any new information as information was already available at the time of first audit proceedings which were dropped; that permission was granted by the Commissioner, Income Tax only for ascertaining the factum of pay order from only one bank, but taxation officer travelled beyond his jurisdiction and asked for all sorts of information from two banks; that no notice under S.122(5) or 122(5A) of the Income Tax Ordinance, 2001 was issued before making additions and notice under S.122(9) of the Income Tax Ordinance, 2001 was issued when the audit proceedings had already been dropped---Validity---No fresh information was available with the department at the time of passing order under Ss.122(1)/122(5) of the Income Tax Ordinance, 2001 as at the time of drop of audit proceedings the department was in possession of alleged bank statement which was acquired on 17-2-2009 and after that proceedings were dropped on 22-9-2009---Initiation of proceedings on the basis of past and closed matter was unjustified and unlawful---While initiating action under S.122(5) of the Income Tax Ordinance, 2001 the department should be in possession of definite information---No definite information was in possession of the department for initiating proceedings under S.122(5) of the Income Tax Ordinance, 2001---Taxation Officer threatened penalty proceedings against the tax payer and forced him to file returns of income and called information from the bank---Fishing and roving inquiries were conducted by the department, and entire proceedings on the basis of such inquiries were disapproved by the higher appellate fora.

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

----S.122 (5A)---Amendment of assessments---Change of jurisdiction---Non-issuance of fresh notice---Taxpayer contended that after change of jurisdiction it was incumbent upon the Deputy Commissioner to issue fresh notice for initiating proceedings; that no fresh notice was issued, therefore, order passed under Ss.122(1)/122(5A) of the Income Tax Ordinance, 2001 was liable to be quashed---Validity---Taxation officer had not issued fresh notice instead he confronted the taxpayer on order sheet which was nullity in law---Appeal was disposed of accordingly.

1999 PTD 1360 ref.

2011 PTD (Trib.) 366 rel.

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

----Ss.176, 111(1)(b) & 122(5A)---Qanun-e-Shahadat (10 of 1984) Art.199---Notice to obtain information or evidence---Income tax proceedings---Qanun-e-Shahadat 1984, applicability of---Taxpayer contended Commissioner only granted permission that only to ascertain a pay order but the Taxation Officer obtained information of bank account for which there was no permission; that bank statement on the basis of which addition had been made under S.111(1)(b) of the Income Tax Ordinance, 2001 was not confronted and violated the provisions of Qanun-e-Shahadat 1984, and that evidence had been used at the back of the taxpayer and law provided that an opportunity be provided to a person to examine or confront the evidence purported to be used against him---Validity---Mandatory approval under S.176 of the Income Tax Ordinance, 2001 given to the Taxation officer for calling information from bank was in respect of Pay order---Taxation officer travelled beyond his jurisdiction and called for the bank statement and wrote a letter for which no approval was obtained by the Commissioner---Action of the Taxation officer was without legal sanctity and of no legal effect---Taxpayer was not confronted with the bank statement in question and no opportunity was provided to him to examine the same---Entire proceedings were held in utter disregard to Qanun-e-Shahadat, 1984---Qanun-e-Shahadat, 1984 was applicable to all income tax proceedings---Income tax authorities exercised quasi judicial powers and jurisdiction and without affording an opportunity to the taxpayer no reliance could be placed on any such statement particularly, when quasi judicial order was assailed---Order of First Appellate Authority was vacated and orders passed by the Taxation officer, whereby additions were made under S.111(1)(b) of the Income Tax Ordinance, 2001, was annulled and penalty imposed under S.182 of the Income Tax Ordinance, 2001 was deleted---Appeal was disposed of accordingly.

1993 PTD 206 ref.

1997 PTD (Trib.) 2209; 2005 MLD 1329 and Supreme Court of Pakistan Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 rel.

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

----Ss. 111(1)(b) & 122(5A)---Qanun-e-Shahadat (10 of 1984), Art.119---Un-explained income or assets---Credit entries of Bank, addition of---Taxpayer contended that Taxation officer had taken all the credit entries; instead of picking the peak deposits for making the addition; that entire amount had been taken as unexplained income from other sources and added under S.111(1)(b) of the Income Tax Ordinance, 2001; that there was no unexplained amount or income and amount deposited in the bank was accumulation of total deposit during one financial year and not a single transaction; that if it was presumed that there was any concealed amount then it was only to the extent of the peak deposit and such peak deposit was covered by the taxpayer's amnesty declaration; and that entire proceedings had been launched in disregard to Qanun-e-Shahadat, 1984 and the same had not been confronted to the taxpayer and no opportunity was provided to examine the same---Validity---Department had taken all the credit entries in the bank account while ignoring the debit entries---Entire credits as deposited in the financial year had been paid off through the same banking channel leaving no balance to be carried forward---First Appellate Authority was not justified in ignoring the debit entries and further not justified in observing that "the discovered bank account statement reflected credit entries only and no debit entries were reflected---Bank statement had been furnished showing debit entries---Department failed to prove that the credit entries constituted the income of the taxpayer---Appeal was disposed of accordingly.

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

----S.122(5A)---Amendment of assessments---Non-issuance of notice under S.122(5) or 122(5A) of the Income Tax Ordinance, 2001 before passing of such order---Validity---Principle of natural justice would be violated in such circumstances---Where giving of notice was provided for in the Statute itself then failure to given such a notice would be fatal and could not be cured.

2009 PTD (Trib.) 1974 and 2007 PTD (Trib.) 2281 ref.

1994 SCMR 2232 rel.

(h) Administration of justice---

----Where law requires a thing to be done in a particular manner, it would be legal and valid only if it was done in that manner and not otherwise.

2005 MLD 1329 rel.

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

----S.122(5A)---Amendment of assessment---Addition---Legality---No addition was legally sustainable if mandatory requirements had not been complied with.

Supreme Court of Pakistan Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 rel.

Muhammad Naseem for Appellant.

Dr. Abdul Sattar Abbasi, DR for Respondent.

Date of hearing: 14th June, 2012.

2013 P T D (Trib.) 116

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and

Zarina N. Zaidi, Accountant Member

Messrs IGI INSURANCE LIMITED, KARACHI and another

Versus

C.I.R., AUDIT DIVISION II, L.T.U., KARACHI and another

I.T.As. Nos.108/KB and 247/KB of 2011, decided on 8th October, 2012.

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

----Ss.109(1)(a), 99, 67, 177, 122(1), 122(5) & Fourth Sched., Rr.6A & 5(b)---Recharacterization of income and deductions---Insurance business---Exemption of capital gains from sale of shares---Capital gain---Scope---Appreciation of investment---Scope---Taxpayer provided services of general insurance in the spheres of fire, marine, motor as well as miscellaneous---Taxpayer's claim of exemption of capital gain under R.6A of the Fourth Schedule to the Income Tax Ordinance, 2001 was rejected on the ground that it was not a capital gain and was in fact "appreciation of investment" which was taxable under R.5(b) being actually an appreciation in value of shares as the taxpayer sold and simultaneously re-purchased the same shares of blue chip companies within 72 hours in a highly controlled manner with the help of an associate through a series of same day twin and simultaneous transactions on the ground that present case was a case of tax avoidance under S.109 of the Income Tax Ordinance, 2001 and was not a capital gain rather it was mere sum taken credit for the accounts for "appreciation of investments" and was liable to be recharacterized under S.109(1)(a) of the Income Tax Ordinance, 2001 read with R.5(a) and R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001---Assessing Officer, further made addition under S.67 of the Income Tax Ordinance, 2001 being apportionment of expenses between Presumptive Tax Regime (PTR) and Normal Tax Regime (NTR)---First Appellate Authority confirmed the action of Assessing Officer in respect of capital gain re-characterized under S.109 of the Income Tax Ordinance, 2001 as revaluation gain and added the same under R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001; and deleted the addition made under S.67 of the Income Tax Ordinance, 2001---Taxpayer contended that since it was engaged in business of General Insurance and S.99 read with R.5 of the Fourth Schedule of the Income Tax Ordinance, 2001 was applicable being special law; that capital gain on sale of shares was exempt under R.6A of the Fourth Schedule to the Income Tax Ordinance, 2001, that such capital gains had been taxed by invoking S.109 of the Income Tax Ordinance, 2001 by treating the actual realized gain as sum taken credit for in the account on account of appreciation read with Rr.5(a) and 5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001---Validity---Transactions of sale and repurchase had taken place resulting in actual realization of capital gain which had accumulated over the years for the reason of increase in market prices of the shares over the taxpayer's cost of purchase---Veracity of such transactions had not been doubted by Taxation Officer in his order---Taxation Officer observed that all elements of the transactions existed including sale consideration, movement of funds, delivery of shares in CDC accounts, deduction of tax and Capital Value Tax on transactions---Tax avoidance could only be done where a taxpayer had more than one modes of carrying out a particular transaction which resulted in different tax liabilities for each mode---Increase in market value of investment held for sale could not be credited to reserve due to statutory requirement of Security and Exchange Commission of Pakistan (Insurance) Rules, 2000---Appreciations on account of market value on investment held for sale had been disclosed by taxpayer in its accounts by way of notes in past years---Until the appreciation in value of investment was credited to reserve account provision of R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001 requiring such credit to be considered a part of taxable profit could not be invoked---Taxpayer had no option but to opt for sale of the investment to realized capital gain which although form part of the balance of profit under R.5 of the Fourth Schedule to the Income Tax Ordinance, 2001 but to exclude therefrom under the provision of R.6A of the Fourth Schedule to the Income Tax Ordinance, 2001---Revaluation of such investment was not possible under the statutory framework for issuance companies and it could not be substantiated that the taxpayer in order to avoid tax opted for realization of capital gain by selling the securities instead of revaluing such securities---Economic substance of appreciation, and realization of gain were different---Real benefit of appreciation could only be crystallized by selling the securities resulting into increase in distributable reserve which could be used for dividend payments whereas revaluation could only give rise to notional gains---Term "wash sale" carried a special meaning when viewed with reference to tax avoidance---Wash sale was the instrument used for crystallizing unrealized losses by sale of securities with the intent to offset such losses against taxable gains to reduce the tax liability, and in such a case there was a repurchase of the same securities to maintain the same investment portfolio---Transaction in the present case was for realization of gain which remained exempt in the year of the transaction but also subsequently up to the date---Law provided for exemption/exclusion under R.6A of the Fourth Schedule to the Income Tax Ordinance, 2001---Contention of Department that "avoidance of an anticipated tax" fell under the tax avoidance scheme could not be accepted as it would mean that all transactions which were covered by time-bound exemptions would fall under tax avoidance scheme and it would make exemption provided by law as redundant and all such transactions would become taxable before the exemption expires---Entire exercise done by the Taxation Officer was unlawful and the order passed by him was illegal and without jurisdiction which was annulled by the Appellate Tribunal and order of First Appellate Authority confirming the additions made was vacated.

2011 PTD 2042; Messrs Alpha v. Insurance's case PLD 1981 SC 293; Central Insurance Company's case 1993 SCMR 1232 = 1993 PTD 766; Messrs EFU General Insurance's case 1997 PTD 1693; I.T.A. Nos.256 to 258/KB of 2009; CIT v. Mercantile Fire and Central Insurance Co., Ltd. 1989 PTD 142; CIT v. International General Insurance Co., Karachi 1991 PTD 401; 1998 PTD (Trib.) 1103; CIT v. Central Insurance Co. Ltd. 2003 PTD 1321; Commissioner (Legal) LTU, Karachi v. EFU General Insurance Ltd. 2011 PTD 2042; Adamjee Insurance Company Ltd. Karachi v. Central Board of Revenue Islamabad and others 1989 PTD 1090; Messrs Sapphire Textile Mills Ltd. v. Collector of Central Excise and Inland Customs, Hyderabad 1990 CLC 456; State v. Zia-ur-Rehman PLD 1973 SC 49; Golden Oraphies (Pvt.) Ltd. and others v. Director of Vigilance, Central Excise, Custom and Sales Tax and others 1973 SCMR 1635; Messrs Home Insurance's case 1992 PTD 1177; Black's Law Dictionary (Sixth Edition); The Concise Oxford Dictionary of Current English (Seventh Edition); Advanced Law Lexicon (The Encyclopedic Law Dictionary with Legal maxims, latin terms and words and phrases; The Concise Oxford Dictionary of Current English (Seventh Edition); Law Terms and Phrases - Judicially Interpreted; Advanced Law Lexicon; I.T.A. No. 767/KB of 2006 Tax Year 2004; I.T.A.No.391/KB of 2007; PLD 1992 SC 262; Ali Muhammad v. Chief Settlement Commissioner 1984 SCMR 94 and 2004 PTD 2180 ref.

Smith v. CIR 1964(1) SA 324(A) and Schofield v. HMRC 2012 EWCA Civ 927 distinguished.

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

----Ss.99, 109, 67, 177 & Fourth Sched., Rr.6A & 5(b)---Insurance business---Taxable income, computation of---Recharacterization of income and deductions---Exemption of capital gains from sale of shares---Application of other provisions of the Income Tax Ordinance, 2001 in computation of taxable income of an insurance company assessable under S.99 of the Income Tax Ordinance, 2001 read with Fourth Schedule to the Income Tax Ordinance, 2001---Validity---High Court disapproved invocation of S.67 of the Income Tax Ordinance, 2001 to the insurance company holding that S.99 of the Income Tax Ordinance, 2001 read with the Fourth Schedule to the Income Tax Ordinance, 2001 were special provisions applicable to insurance company and general provisions of the Income Tax Ordinance, 2001 were not to be applied in case of insurance companies---Provisions of S.109 of the Income Tax Ordinance, 2001 were not applicable to the taxpayer being a general insurance company assessable under S.99 of the Income Tax Ordinance, 2001 read with the Fourth Schedule of the Income Tax Ordinance, 2001.

2011 PTD 2042 and 2004 PTD 2180 rel.

Central Insurance Company's case 1993 SCMR 1232 = 1993 PTD 766 ref.

(c) Judgment---

----Per incuriam judgments---Scope---As a general rule only those decisions should be held to have been given per incuriam which are given in ignorance or forgetfulness of some inconsistent statutory provisions or of some authority binding on the court concerned.

2011 PTD 2042 and Central Insurance Company's case 1993 SCMR 1232 = 1993 PTD 766 rel.

(d) Judgment---

----Per incuriam judgment---Declaration---Scope---Subordinate fora can not declare the judgment of a higher appellate fora to be incuriam.

Arshad Siraj and Shabbar Zaidi, FCA for Appellants (in I.T.A. No.108/KB of 2011).

Amjad Javed Hashmi for Respondents (in I.T.A. No.108/KB of 2011).

Amjad Javed Hashmi, Advocate (D.R.) for Appellants (in I.T.A. No.247/KB of 2011).

Arshad Siraj and Shabbar Zaidi. F.C.A. for Respondents (in I.T.A. No.247/KB of 2011).

Date of hearing: 12th June, 2012.

2013 P T D (Trib.) 158

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and

Zarina N. Zaidi, Accountant Member

Messrs LATIF KNITS, KARACHI

Versus

C.I.R.(ENF) RG-II COLL S.T. & F.E., KARACHI

M.As. (A.G) Nos.53/KB to 60/KB of 2012 and S.T.As. Nos.50/K, 75/K, 78/K to 81/K, 100/K, 101/K of 2009, decided on 30th August, 2009.

Sales Tax Act (VII of 1990)---

----Ss. 10(4) & 8A---Qanun-e-Shahadat (10 of 1984), Art. 117---Finance Act (III of 2006)---S.R.O. No.575(I)/2002, dated 31-8-2002, Rr.2, 4 & 8---Refund of Input tax---Claims of refund were rejected on the basis of (Sales Tax Automated Refund Repository Computer System (STARR) objections like "Exceed declared output, Invoice Summary not submitted and Duplicated" of the supplier---Taxpayer contended that show cause notices were time barred as fourteen days time had been prescribed for issuing notice and very basis on which the orders had been made were ab initio void, illegal and without jurisdiction; that said order travelled beyond the show-cause notice and orders framed on the basis of such discrepancy were not maintainable; that suppliers were duly active and their name appeared on the list of official website of Federal Board of Revenue and allegations that supplier were inactive was based on presumption that as per S.8A of the Sales Tax Act, 1990, revenue authorities should have issued the notices to the suppliers and not to the taxpayer, and that Qanun-e-Shahadat Order, 1984 cast duty upon the revenue authorities to prove that the invoices issued by the suppliers were fake and not genuine on the basis of which the input tax was claimed---Revenue authorities contended that refund claims were rejected as the invoice summary had not been filed and the suppliers were blocked due to the fact that invoices were issued for huge amounts but nominal amount of sales tax was deposited in Government Exchequer; and that there was no time limit under S.10(4) of the Sales Tax Act, 1990---Validity---Rule 2 of S.R.O. No.575(I)/2002 dated 31-8-2002, provided that after filing of refund claim, processing officer submits a written comprehensive refund examination report within seven days of the receipt of supportive documents to the concerned senior auditor or superintendent who had to give his conclusive recommendations thereon and pass it on to the officer-in-charge within three days of receipt of the case from the processing officer---Second step provided under R. 4 of S.R.O. in question was that where the officer-in-charge was of opinion that any further inquiry or audit was required to establish the genuineness and admissibility of the claim or otherwise, he may make or cause to be made such inquiry or audit after approval from the Additional Collector under intimation to the refund claimant---No such steps had been taken by the adjudicating officer in the present case---Instructions given in S.R.O. No.575(I)/2002 dated 31-8-2002 had not been followed---After filing of refund claims no objection had been communicated to the taxpayer within the time prescribed under the rules---After a lapse ranging between two to four years, show cause notices were issued, which were beyond the stipulated time of fourteen days---Amounts shown in some of the show-cause notices were different from those which were mentioned in the orders---When the law required a thing to be done in a particular manner, it would be legal and valid only if it was done in that manner and not otherwise---Orders were not sustainable in the eyes of law---Orders of First appellate authority were vacated and Adjudicating Authority was directed to issue refunds as per law.

2012 PTD (Trib.) 34 and 2005 MLD 1329 rel.

Imran Iqbal for Applicant.

S.M. Javed (A.O.) and Kazi Afzal (D.R.) RTO-II for Respondent.

Date of hearing: 30th July, 2012.

2013 P T D (Trib.) 181

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

Messrs SAMSOL INTERNATIONAL (PVT.) LTD., LAHORE

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE (APPEALS), LAHORE

Ex. No.32/LB of 2009, decided on 6th September, 2012

Federal Excise Rules, 2005---

----R.45(5)---Sales Tax Rules, 2006, R.15(5)---Payment through electronic banking---Scope---Delay in clearing of payment---Deposit of tax after due date---Effect---Return for payment of Excise Duty was filed on 15th November, 2008 along with necessary documents and tax due---Account of the taxpayer was in a Bank which allowed concession and privilege to make payment electronically through direct debit---Tax paid by registered person on 15th November, 2008 through direct debit could not be transferred by the Bank in account of Revenue authorities---Payment of tax was cleared by the Bank on 17th November, 2008---Notice was issued to the taxpayer for delay in making payment of tax and additional tax and penalty was imposed on it---Validity---Department had not denied that payment of tax was made through electronic banking on 15th November, 2008 i.e. on due date---Payment was deposited in account of Revenue authorities on 17th November, 2008---Payment through direct debit was faster than any other mode, because the transfer of funds reflected immediately in the accounts of payer and recipient---Bank in question was working as agent of Revenue authorities and any payment received by the Bank under R.45(5) of the Federal Excise Rules, 2005 was deemed to have been received by Revenue authorities---When Bank for any reason deposited the collected amount late in the account of Revenue authorities it was a matter between agent/Bank and principle/Revenue authorities---Taxpayer could not be penalized under such circumstances---Payment made through electronic banking (direct debit) by taxpayer was within time---Direct debit, though, not expressly covered under R.45(5) of the Federal Exercise Rules, 2005, yet it sufficiently met the intent and object of rule makers---Principles of 'ejusdem generis' could be employed to construe that payment made through "direct debit" was under the said rule---Orders of authorities below were declared against the spirit of law and were annulled by the Appellate Tribunal.

Waseem Ahmed Malik for Appellant.

Karamatullah Ch. D.R. for Respondent.

Date of hearing: 6th September, 2012.

2013 P T D (Trib.) 189

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs KARACHI SHIPYARD AND ENGINEERING WORKS, KARACHI

Versus

A.C.I.R.-B, AD-I, L.T.U., KARACHI

I.T.As. Nos.582/KB to 584/KB, 689/KB to 691/KB of 2011, decided on 24th July, 2012.

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

----S.122(5A)---O.M. No.5010-M(IT)/18 dated 23-8-1980---Amendment of assessments---Binding effect of said O.M.---Taxpayer contended that First Appellate Authority erred in holding that O.M. No.5010-M(IT)/18 dated 23-8-1980 could not overrule express provisions of Income Tax Ordinance, 2001 whereas the fact was that the said O.M had binding effect on the functionaries of Income Tax Department---Validity---Finding of First Appellate Authority had force since O.M being relied on was issued in 1980 which now stood repealed by Income Tax Ordinance, 2001---Even otherwise Federal Board of Revenue could not intervene in quasi-judicial functions of the Assessing Officer---Objection regarding referring case to Federal Board of Revenue had no force since taxpayer was supposed to make request for referring his case to Federal Board of Revenue; which it did not---No reason existed to interfere with the findings of First Appellate Authority on the issue which was accordingly upheld and appeals filed by the taxpayer was rejected.

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

----S.122 (9)---Amendment of assessments---Opportunity of being heard---Scope---Contention of the taxpayer was that proper opportunity of being heard was not afforded to it---Validity---Such contention of taxpayer was not relevant on the ground that the taxpayer itself had admitted that notice under S.122 (9) of the Income Tax Ordinance, 2001 was issued to it, which itself was an opportunity of being heard provided to the taxpayer.

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

----Ss.18(2), 18(3), 39 & 122(5A)---Income from business---Profit on deposit of surplus fund---Adjustment of profit on bank deposits in the brought forward business losses---Taxpayer contended that Taxation Officer was not justified to refuse adjustment of profit on bank deposits in the brought forward business losses on the ground that profit of bank deposit was assessable under S.39 of the Income Tax Ordinance, 2001 whereas the interest on bank deposit was business income of the taxpayer on the surplus funds deposited by the taxpayer in the bank---Revenue authorities contended that profit on bank deposits was separately assessable under S.39 of the Income Tax Ordinance, 2001 and could not be adjusted in the brought forward business losses---Validity---Business income was assessable under S.18 of the Income Tax Ordinance, 2001 whereas the profit on debt was assessable under S.39 of the Income Tax Ordinance, 2001---Taxpayer itself had declared the interest income as other income in statement of accounts---When law provided that things were to be done in a particular manner it had to be done in that particular manner---Contention of Revenue authorities that profit on debt was assessable under S.18 of the Income Tax Ordinance, 2001 had force---Brought forward business losses could not be adjusted against the interest income which was separately assessed under S.18 of the Income Tax Ordinance, 2001---Order of First Appellate Authority was not interfered with, which was upheld by the Appellate Tribunal---Appeal filed by the taxpayer on the issue was dismissed.

I.T.A. No.8652 of 1971-72 dated 25-7-1973 and 1988 PTD (Trib.) 369 distinguished.

2010 PTD 1809; 2004 PTD 2255= 90 Tax 33; C.I.T. v. Liquidator Khullna Bager Hat Railway Co. 5 Tax 262 = 1962 PTD 415; 2010 PTD 1397 and 2000 PTD 363 rel.

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

----Ss.40 & 122(5)---Deductions in computing income chargeable under the head "Income from Other Sources"---Borrowed capital---Interest income---Adjustment of interest paid on borrowed capital against interest income---Taxpayer contended that Taxation Officer was not justified in subjecting to tax gross amount of bank deposits without setting-off the interest paid on borrowed capital invested in the bank on which profit was earned and also in not allowing part of expenses which were incurred on earning the profit---Validity---Issue was referred back by the First Appellate Authority to verify from the record that whether proportionate expenses incurred on interest earning on bank deposits had been claimed and allowed against business income or not; and further directed that after ascertaining the factual position, the proportionate interest expenses might be allowed against interest/ profit on debt on bank deposits to the extent of utilization of borrowed amount in earning interest income; and Assessing Officer ensured that no double deductions were allowed---Taxpayer contended that he had earned income by depositing surplus business funds in the bank which indicated that if at all interest expenses was to be allowed, it was supposed to be allowed on borrowed capital whereas admittedly the taxpayer had the surplus business funds on which he had earned interest income and setting of any interest expenditure against such interest income earned would not be justified---Interest expenditure against such interest income earned was not allowable---Order of First Appellate Authority was vacated by the Appellate Tribunal on the said issue.

1999 PTD (Trib.) 708 ref.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Provision for slow moving stores, spares and loose tools---Taxpayer contended that First Appellate Authority had erred while maintaining disallowance of provision for slow moving stores, spares, spares loose tools as it was not provision and complete details of expenses were provided to the Department---Revenue authorities contended that it was provision and provision could not be allowed as expenditure under the Income Tax Ordinance, 2001---Validity---Controversy was whether taxpayer had made a provision for the expenditure or the expenses incurred were actual---Taxpayer claimed that details were filed with the Department but First Appellate Authority had made observation that no details were filed---Issue was set aside in circumstances, and remanded back to resolve the controversy and proceed as per law after affording reasonable opportunity of being heard to the taxpayer.

(f) Income Tax---

----Exchange losses, issue of---Consistent practice, following of---Scope---Taxpayer contended that in the past exchange gain/loss were worked out on notional basis and assessed accordingly by the Department whereas the treatment given to the taxpayer was deviation from past practice---Revenue authorities contended that exchange gain/loss was rightly assessed on actual basis---Validity---Consistency should be followed in assessment of exchange gain/loss in the case of the taxpayer---Order of First Appellate Authority was set aside on the issue and remanded back the case to ascertain the factual past practice on the issue in the case and proceed as per law after affording reasonable opportunity of being heard to the taxpayer.

Muhammad Hassan Alam for Appellant (in I.T.As. Nos. 582/KB to 584/KB of 2011).

Azhar Erum Memon, D.R. LTU for Respondent (in I.T.As. Nos. 582/KB to 584/KB of 2011).

Azhar Erum Memon for Appellant. (in I.T.As. Nos. 689/KB to 691/KB of 2011).

Muhammad Hassan Alam for Respondent (in I.T.As. Nos.689/KB to 691/KB of 2011).

Date of hearing: 11th April, 2012.

2013 P T D (Trib.) 205

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

C.I.R. (LTU), LAHORE

Versus

Messrs F.M.C. UNITED (PVT.) LTD., LAHORE

I.T.A. No.1415/LB, M.A. No.56/LB of 2011, I.T.As. Nos.907/LB, 1440/LB of 2010 and I.T.A. No.801/LB of 2011, decided on 26th July, 2012.

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

----Ss. 35(4), 34(3) & 122(5A)---Stock-in-trade---Provision for obsolete stocks---Scope---Taxpayer contended that some expired pesticides were returned by the retailers/wholesalers which became part of 'stock in trade; that on expiry, the value of returned pesticides had reduced, and their value was booked almost as scrap, while determining the value of stock in trade; that provision was created of the sustained loss in shape of expenses under profit & loss account; that reliance by taxation officer on S.34(3) of the Income Tax Ordinance, 2001 was misplaced; that valuation of stock was made under S.35(4) of the Income Tax Ordinance, 2001, which envisaged closing value of stock in trade at the end of the year, and under said section, closing value could either be 'lower of cost' or 'net releasable value' of the available stock; that stock was valued at "net releasable value" and the difference in shape of loss, was claimed as expense---Department contended that provision for obsolete stocks could not have been allowed unless the obsolete stock was written off, and such provision could only be allowed if obsolete stock was actually written off---Validity---Section 35(4) of the Income Tax Ordinance, 2001 allowed the taxpayer to value its closing stock-in-trade either at "the lower of cost" or "net releasable value"---Condition of writing off obsolete stock was not found as a pre-requisite in any provision of law---Writing off was not a precondition under law---Obsolete stock could not be booked at zero value because it might gain some price if it was disposed of even as scrap---Where stock-in-trade was sold at higher price from the one at which it was booked, the difference was to be taxed as gain---Section 34(5) of the Income Tax Ordinance, 2001 ensured, under mercantile system, that after three years if an allowed deduction of an expenditure was not paid, the same should be treated as income---Contention of department that obsolete stock should have been written off was not in consonance with the provisions of law---Orders of both the authorities below on said issue were annulled by the Appellate Tribunal and expenses claimed by the taxpayer were allowed.

I.T.A. No. 2164/LB of 2006 ref.

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

----S.169 (2)---Tax collected or deducted as a final tax---Gain out of sale of scrap and fixed assets---Proration between Final Tax Regime and Presumptive Tax Regime---Department contended that First Appellate Authority was not justified to allocate the income/gain arising out of sale of scrap and fixed assets between the Final and Normal Tax Regimes, as an income on which no withholding tax was charged, could not have been offered for tax in Final Tax Regime; that by allowing such gain the prohibition contained under S.169(2) of the Income Tax Ordinance, 2001 would be offended, which envisaged that no depreciation or expense etc. should be allowed under Final Tax Regime---Taxpayer contended that gain out of sale of scrap and fixed assets was recoupment of the depreciation allowed to taxpayer; that scrap and fixed assets were used in the business of both the regimes; and that no tax could be charged on gain, which related to the portion of income from Final Tax Regime---Validity---Gain in question arose as a consequence of depreciation allowed over the years---Taxpayer by availing such allowance, implicitly agreed that allowance of depreciation would, if same resulted into a gain on sale of particular assets, be taxed as gain---Assets in question were used for both business regimes i.e. Presumptive Tax Regime and Normal Tax Regime---Gain in question was a result of allowed depreciation, which should not be left un-taxed for the reason that under Final Tax Regime no gain could have been taxed---Where such gain was left untaxed, it would violate the provisions of S.169(2) of the Income Tax Ordinance, 2001 which expressly prohibited allowance of any depreciation or expenses under Presumptive Tax Regime---Taxation officer was directed to tax the gain only to the extent of actual payment/allowance of depreciation by taxpayer .

(c) Income Tax---

----Exchange gain---Proration between Final Tax Regime and Presumptive Tax Regime---Scope---Exchange gain should be prorated between Final Tax Regime and Presumptive Tax Regime.

Karamatullah Ch. D.R. for Appellants (in I.T.As. Nos.1415/LB and 907/LB of 2010 and M.A. No.56/LB of 2011).

Asim Zulfiqar, FCA and Maqsood Ahmed, ACA for Respondents (in I.T.A. No.1415/LB of 2010, M.A. No.56/LB and I.T.A No.907/LB of 2010).

Asim Zulfiqar, FCA and Maqsood Ahmed, ACA for Appellants (in I.T.As. Nos. 1440/LB of 2010 and 801/LB of 2011).

Karamatullah Ch. D.R. for Respondents (in I.T.As. Nos. 1440/LB of 2010 and 801/LB of 2011).

Date of hearing: 26th July, 2012.

2013 P T D (Trib.) 214

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and

Zarina N. Zaidi, Accountant Member

FAUJI OIL TERMINAL AND DISTRIBUTION COMPANY LTD., KARACHI

Versus

COMMISSIONER INLAND REVENUE (APPEALS-I), LARGE TAXPAYER'S UNIT, KARACHI

S.T.As. Nos.116 to 120 of 2011, decided on 10th October, 2012.

(a) Sales Tax---

----Stevedore service---Scope---Service chargeable to sales tax---Services of unloading bulk cargo oil from ships fell within the ambit of stevedore services making the taxpayer liable to charge of sales tax---Since taxpayer was handling stevedore services, their argument that they were terminal operator and not stevedore did not carry any weight for the reason that terminal operators can and do render services of stevedore.

(b) Sales Tax---

----Stevedore services---Scope---Service chargeable to sales tax---Taxpayer contended that he was mere investor who had installed the machinery under an agreement with the Port authority and ships got connected to the pipe lines themselves and downpoured the oil into the pipes without involving any stevedoring---Validity---Argument of the taxpayer beged the question as to who owned the machinery and pipelines involved in the entire system whereby the bulk cargo was unloaded from the ships---Entire structure including machinery and pipelines was erected and owned by the taxpayer with the purpose of unloading bulk oil from ships---Nature of services performed through machines and pipelines was stevedoring services, which squarely fell within the ambit of stevedoring services chargeable to sales tax.

(c) Sindh Sales Tax Ordinance (VIII of 2000)---

----S.3---Sales Tax Act (VII of 1990), S.3---Federal Excise Duty Rules, 2005, R.43B---Federal Board of Revenue letter C. No. 1(4) STT/ 2007/2285-R dated 5-1-2011---Stevedore services, taxability of---Taxpayer contended that it was a terminal operator and was liable to pay Federal Excise Duty and Federal Board of Revenue had transferred the responsibility to collect and deposit the Federal Excise Duty on the Port authority on behalf of company---Revenue authorities contended that taxpayer was liable to pay Federal Excise Duty and Sales tax under two different laws i.e. Federal Excise Act, 2005 and Sindh Sales Tax Ordinance, 2000, read with Sales Tax Act, 1990, which were entirely different enactments that special procedure for charge levy or collection of one tax could not be applied to the other tax; that arguments of the taxpayer on the basis of Federal Excise Act, 2005, or the Rules made there under were irrelevant and could not help their case in respect to their statutory obligations under the Sindh Sales Tax Ordinance, 2000, read with Sales Tax Act, 1990---Validity---Federal Board of Revenue issued letter C. No.1(4) STT/2007/2285-R dated 5-1-2011 to explain/lay down procedure or collection of Federal Excise Duty payable under R.43B of Federal Excise Duty Rules, 2005---Nothing in the said letter related to payment of sales tax on stevedoring services and obligation to charge, levy and pay sales tax was on the taxpayer and the liability to pay sales tax was on the person rendering the services which was on the taxpayer and not on the Port authority.

(d) Sales Tax---

----Stevedoring services---Collection of receipts on the basis of fixed throughput charges rather than value of supply---Legality---Taxpayer contended that since value of supply was missing, therefore, tax was not leviable under the law---Revenue authorities contended that amount received by the taxpayer whether on the basis of services rendered or on the basis of fixed amount represented the value of supply; and that chargeability of sales tax was fully lawful---Validity---For chargeability of sales tax what needed to be determined was "Nature of Services" and not "Mode of payment"---Services being rendered by the taxpayer were stevedoring in nature and same chargeable to sales tax---Entire amount, whether on the basis of activity or on the basis of fixed throughput charges, was chargeable to Federal Excise Duty for the reason that charging section of the Sales Tax Ordinance, 2000, read with Sales Tax Act, 1990, did not make basis of payment as a precondition for chargeability of the tax---Order of First Appellate Authority was upheld by the Appellate Tribunal on the issue.

(e) Sindh Sales Tax Ordinance (VIII of 2000)---

----S.3(3)---Sales Tax Act (VII of 1990), S.71---Stevedoring services, taxability of---Taxpayer contended that Sales Tax Special Procedure Rules, 2005, 2006 & 2007 were ultra vires having no validity in the eyes of law; and that Federal Government had gone beyond its powers to levy Sales Tax on "Terminal Operators" which was not enumerated in the schedule of Sindh Sales Tax Ordinance, 2000---Revenue authorities contended that Special Procedure Rules were perfectly intra vires as they laid down procedure for collection of Sales Tax on "stevedore" services which were mentioned in the Schedule to the Sindh Sales Tax Ordinance, 2000---Validity---Sales Tax Special Procedure Rules, 2005, 2006 & 2007 were framed under the powers conferred to the Federal Government by S.71 of the Sales Tax Act, 1990, thus, their vires could not be challenged---Section 3(3) of the Sindh Sales Tax Ordinance, 2000 fully authorized the framing of Rules, notification, orders under the Sales Tax Act, 1990, which were applicable on the levy under the Sindh Sales Tax Ordinance, 2000.

(f) Sales Tax Special Procedures Rules, 2005---

----R.55(1)(k)---Services, definition of---Determination---Stevedoring services---Taxpayer asserted that they were Terminal Operator and not stevedore on the strength of dictionary definition---Validity---For the purposes of definition one had to examine as to whether the said word was defined in the statute or not---Where such definition was available then one had to apply the said definition as defined without seeking further assistance from ordinary dictionary, but when the definition of the word was not available in that case guidance might be taken from the definition or meaning available in the ordinary dictionary or judicial pronouncement---Definition of word 'stevedore' was defined leaving no iota of doubt, and reference to ordinary dictionary meaning or judicial pronouncement was irrelevant and carried no credence.

(g) Sindh Sales Tax Ordinance (VIII of 2000)---

----S.3 (3)---Sales Tax Act (VII of 1990), S.71---Stevedoring services---Supply, definition of---Scope---"Toll manufacturing"---Scope---Taxpayer contended that even if it was providing services of stevedores sales tax should not be chargeable on it with effect from 1st July 2008 due to change in the definition of supply given at S.2(33) of the Sales Tax Act, 1990, where from the phrase "other disposition of goods" had been omitted vide Finance Act, 2008; that due to such change the arrangement between a vendor and a toll manufacturer could not be covered under the definition of "supply" but rather bailment of goods, which was beyond the charge of Sales Tax under the Sales Tax Act, 1990; that as per S.3(3) of the Sindh Sales Tax Ordinance, 2000, the Sales Tax Act, 1990, and Rules and notification made thereunder applied mutatis mutandis to Sindh Sales Tax Ordinance, 2000; that toll manufacturing was no longer covered under the Sales Tax Act, 1990; and the same could not be made applicable in respect of stevedores services---Revenue authorities contended that services chargeable to tax were being performed by the taxpayer; that concept of toll manufacturing could not be stretchered and made applicable; and that taxpayer was rendering stevedore services, which was chargeable to sales tax, regardless of taxpayers arrangement with the Port authority--Validity---Taxpayer was rendering chargeable services and was liable to pay sales tax on the stevedore services---Express charge of tax on a person created by express provision of law must be discharged and stretching a concept which was associated with manufacturing of goods to rendering of services did not carry legal force to override the express provision of law---Toll manufacturing was an arrangement whereby one firm with specialized equipment processed raw materials or semi-finished goods for a second firm---No relation of toll manufacturing or the change in the definition of "supply" was found in the present case, and even otherwise, liability to pay sales tax on stevedore services was on taxpayer and not on the Port authority for the reason that the services were being rendered by the taxpayer and their private agreement could not override the provisions of statutory law.

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

----S.34---Default surcharge, levy of---Scope---Mens rea---Taxpayer contended that without mens rea, levy of default surcharge was not justified---Revenue authorities contended that non-payment of sales tax over a long period of time proved the guilty mind and mens rea on the part of taxpayer---Validity---Imposition of default surcharge under S.34 of the Sales Tax Act, 1990 was mandatory and not discretionary---Appeal was disposed of accordingly.

Collector of Customs v. Dhan Fibre Ltd. 2010 PTD 515 rel.

(i) Sales tax---

----Remand of case---Propriety---Case was remanded back by the First Appellate Authority for allowing adjustment of payment made by the taxpayer in accordance with Sales tax law---Taxpayer contended that by doing so First Appellate Authority had given discretion to Taxation Officer to allow adjustment or not---Revenue authorities contended that payment of tax needed to be verified before credit might be allowed or not and the office of Deputy Commissioner of Inland Revenue was in the best position to perform such function---Validity---Grounds taken in appeal before Commissioner Inland Revenue were silent on the issue of giving tax credit---Contention that First Appellate Authority remanded the case beck to Taxation Officer for allowing adjustment of payment was mis-founded.

Saqib Masood, FCA for Appellant.

Tariq Hussain Tunio, D.R. for Respondent.

Date of hearing: 27th September, 2012.

2013 P T D (Trib.) 228

[Inland Revenue Appellate Tribunal of Pakistan]

Before Zafar Iqbal, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs ANWAR ENGINEERING WORKS, KARACHI

Versus

COLLECTOR OF SALES TAX

S.T. No. 642/K of 2009, decided on 30th January, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 36(3), 2(44), 3(1A), 6, 7, 22, 23, 26 & 73---Sales Tax General Order (STGO) No.1 of 2004---Recovery of tax not levied or short-levied or erroneously refunded---Defective show cause notice in respect of deliberation, collusion, specific allegations and evidence---Validity---Show cause notice revealed that requirements laid down by S.36 of the Sales Tax Act, 1990 were not met and show cause notice did not allege that the offending acts were deliberate or there stood a collusion---Allegations were not specific and no evidence to support the same was gathered or provided to the taxpayer---Department was duty bound to supply grounds or reasons in clear and explicit words to ascertain under which subsection of S.36 of the Sales Tax Act, 1990 the case would fall---No such effort was made by the department and show cause notice remained defective and failure to abide by the law had rendered the show cause notice invalid---Administrative authorities had to function within the frame work of law---Law was to be followed as was directed and requirements stated in the statute were to be followed in letter and spirit---Appellate Tribunal observed that it the tendency of administrative authorities that often they acted on their personal whims and failed to follow the commands of law, and that in such circumstances they were not protracted by law and cases made out by them were going to be defeated---Show cause notice was defective and did not have any legal effect---Orders were set aside by the Appellate Tribunal.

Caltex v. Collector 2006 SCMR 1519 and AC Customs v. Khyber Electric Lamps 2001 SCMR 838 rel.

Muhammad Naseem for Appellant.

Tahir Zafar, D.R. for Respondent.

Date of hearing: 11th January, 2012.

2013 P T D (Trib.) 235

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

C.I.R., LD, LTU, KARACHI

Versus

Dr. ZULFIQAR H. TUNIO, Proprietor Laser--Inn Aesthetic Centre, Karachi

I.T.A. No.232/KB of 2011, decided on 2nd May, 2012.

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

----S.122---Amendment of assessment---Bank entries---Addition to income of taxpayer---Peak credit entry---Scope---Revenue authority contended that First Appellate Authority was not justified in deleting the addition as Taxation Officer had duly taken into account all the reverse entries in the bank---Taxpayer contended that difference between bank statements and return of income had duly been reconciled; that Taxation officer failed to apply his mind that withdrawn amount had been redeposited and even if Taxation officer was not satisfied with the explanation, he could only pick the peak deposits which had not been done---Validity---Difference between bank deposits and its receipts declared in the return had been reconciled by submitting reconciliation---First Appellate Authority had not picked the peak credit entry of the bank and only said entry was to be added in the income of the taxpayer and not the total deposit appearing in the bank account---Contention of taxpayer that withdrawal amount had been re-deposited had not been rebutted by Revenue authority---Order of First Appellate Authority was vacated and case was remanded back to the Taxation officer with direction to strictly examine the bank statement and reconciliation that was to be submitted by the taxpayer and if there was any difference between the bank deposits and receipts declared in the return then pick the peak credits entires appearing in the bank account and add back the same after providing reasonable opportunity of hearing to the taxpayer and pass a judicious order after taking into consideration the arguments of the taxpayer and direction of the Appellate Tribunal.

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

----S.21(m)---Deductions not allowed---Salaries paid to employees---Restriction of dis-allowance---Scope---Revenue authority contended that First Appellate Authority was not justified in restricting the disallowance made out of salaries paid to the employees; that S.21(m) of the Income Tax Ordinance, 2001 clearly stated that no salaries expenses could be allowed if the amount paid other than cheque exceeded Rupees ten thousand, and that entire amount was to be disallowed rather than restricting the same---Taxpayer contended that First Appellate Authority was justified in restricting the disallowance exceeding Rupees ten thousand paid other than crossed cheque; and correctly worked out the disallowance to be made---Validity---While calculating the income from business the deduction should not be allowed, if salary exceeding Rupees ten thousand was paid other than by a crossed cheque---Admittedly in the present case salaries were paid in cash and exceeded Rupees ten thousand, therefore the same could not be allowed as business expense under the provision of S.21(m) of the Income Tax Ordinance, 2001---First Appellate Authority mis-interpreted the law and restricted the disallowance made by the Taxation officer---Section 21(m) of Income Tax Ordinance, 2001 was enacted purposely to thwart fraudulent or sham transactions---Section 21(m) of the Income Tax Ordinance, 2001 might be read in conjunction with main S.21 of the Income Tax Ordinance, 2001 which unequivocally stated that "no deductions shall be allowed in computing the income from Business", if any salary paid or payable exceeded Rupees ten thousand per month other than through crossed cheque---First Appellate Authority misinterpreted the law by restricting the disallowance---Salaries paid to employees in cash were not allowable expenditure---Order of First Appellate Authority was vacated, wherein it, had restricted the disallowance and that of Taxation Officer was restored---Appeal was disposed of accordingly.

Asim Siddiqui, D.R. for Appellant.

Iqbal Yousuf, FCA for Respondent.

Date of hearing: 3rd April, 2012.

2013 P T D (Trib.) 246

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairperson and Mian Masood Ahmad, Accountant Member

ALLIED BANK LIMITED, LAHORE and others

Versus

COMMISSIONER INLAND REVENUE, LTU, LAHORE and others

I.T.As. Nos.5115/LB, 3580/LB, 3581/LB, 4063/LB, 4064/LB of 2004, 4581/LB, 4582/LB, 5061/LB to 5064/LB of 2003, 5105/LB, 5106/LB, 6029/LB, 6022/LB of 2005, 1119/LB, 1146/LB of 2006, 711/LB, 651/LB of 2008, 305/LB, 440/LB, 441/LB of 2009, 145/LB of 2010, 627/LB, 628/LB, 769/LB, 597/LB and 1613/LB of 2011 and M.As. (Rec.) Nos. 242/LB of 2009 and 33/LB of 2011, decided on 15th May, 2012.

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

----Ss.121, 177(10) & 120---Best judgment assessment---Assumption of jurisdiction---Department contended that by insertion of subsection (10) of S.177 of the Income Tax Ordinance, 2001, assessment was treated to have been made on the basis of return or revised return shall be of no legal effect while making best judgment assessment under S.121 of the Income Tax Ordinance, 2001---Taxpayer contended that such insertion through Finance (Amendment) Ordinance, 2010, promulgated on 6-2-2010, could not be applied in respect of already completed assessment under S.120 of the Income Tax Ordinance, 1979 and it could only be applied in respect of assessments treated to have been made under S.120 of the Income Tax Ordinance, 2001 after insertion of such subsection---First Appellate Authority held the order under S.121 of the Income Tax Ordinance, 2001 as valid in view of S.177(10) of the Income Tax Ordinance, 2001---Taxpayer pressed for adjudication of the matter on merit before the Tribunal---Accepting the request, Appellate Tribunal disposed of legal ground as not pressed and adjudication was made on merit alone for tax year 2009.

Writ Petition No.2412 of 2009 dated 27-4-2012; 2010 PTD 705 (Trib.); 625/IB/2010; (2010) 101 Tax 153 (Trib.) = 2010 PTD (Trib.) 2602; 2010 PTD (Trib.) 30; 2010 PTD (Trib.) 1067; 2010 PTD (Trib.) 1473; 2010 PTD (Trib.) 819 and 2011 PTD (Trib.) 1552 ref.

(b) Income Tax---

----Interest on securities on accrual basis---Taxation of---Department was directed to tax interest on securities on actual receipt basis and not on accrual basis in the light of settled law.

(1994) 69 Tax 197 (Trib.)(sic); I.T.A. No.812(IB) of 2006; 2003 PTD 1146; Habib Bank Ltd. v. CIT 2009 PTD 443 and I.T.As. Nos.145, 148, 149, 151, 152 and 154 of 1998 rel.

1994 PTD (Trib.) 1051 ref.

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

----S.32---Method of accounting---Banking Companies Ordinance (LVII of 1962), Ss.35 & 91A---State Bank of Pakistan Act (XXXIII of 1956), Ss.46B & 54A---Loss on diminution in value of investment---Assessment years 1999-2000 and 2002-2003 and tax year 2006---Taxpayer claimed that provisions were made as per prudential Regulations of State Bank of Pakistan which override Income Tax Law; and taxpayer/banks were bound to prepare their accounts according to International Accounting Standards and Regulations issued by the State Bank of Pakistan; and these accounts represent their regularly employed method of accounting as envisaged in S.32 of the Income Tax Ordinance, 2001; and department could not reject this method; and there was no prohibition in income tax law not to record closing stock at lower of cost or market price; and department for tax year 2010 had allowed impairment loss---Validity---Addition made by the department for assessment years 1999-2000 to 2002-2003 and 2006 were upheld by the Appellate Tribunal, however, department was directed to allow the impairment loss, if any, at the time of actual sale as it had done itself for tax year 2010.

2010 PTD (Trib.) 679 distinguished.

2006 PTD (Trib.) 356 rel.

2006 PTD 354; 2002 PTD 925; 2000 PTD (Trib.) 2668; (2002) 85 Tax 245; I.T.A. No.3819/LB of 1997 dated 7-12-1999 and I.T.A. No.400/LB of 2000 dated 10-12-2001 ref.

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

----Ss.100A, 99, Fourth Sched. & Seventh Sched.---Special provisions relating to banking business---Banking Companies Ordinance (LVII of 1962), Ss.35 & 91A---State Bank of Pakistan Act (XXXIII of 1956), Ss.46B & 54A---International Accounting Standards 39 & 40---Loss on diminution in value of investment---Tax years 2009 and 2010---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 was exactly the same as S.99 read with the Fourth Schedule to the Income Tax Ordinance, 2001---Present issue having already been decided in favour of taxpayer, addition for tax year 2009 and 2010 was deleted by the Appellate Tribunal.

2006 PTD (Trib.) 679; 2006 PTD 354; 2002 PTD 925; 2000 PTD (Trib.) 2668; (2002) 85 Tax 245; I.T.A. No.3819/LB of 1997 dated 7-12-1999; I.T.A. No.400/LB of 2000 dated 10-12-2001 and 2006 PTD (Trib.) 356 ref.

2011 PTR 222 rel.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Other provision/provisions against other assets---Taxation of---Taxpayer contended that claim was that there were ascertainable liabilities and not mere provision; and it was the substance that matter and not the mere nomenclature given to any transaction---Validity---Held, it was substance that matter and not the nomenclature given to any transaction---Liability could not become unascertainable if it was named as provision---Department was directed to allow the deduction.

2001 PTD 1427; 2001 PTD 744; 2001 PTD 3326; 2006 PTD (Trib.) 356; I.T.As. Nos.1012 and 1014/IB/1995 dated 18-7-2006; 2011 PTR 222; 2011 PTR 165; CIT v. Security Leasing Corporation ITRA No.219 of 2009 and 2009 PTD 443 rel.

I.T.A. No.565 of 2000 distinguished.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Optional Retirement Scheme---Expenses of---Deduction under the Optional Retirement Scheme' was disallowed on the ground that taxpayer/bank failed to prove that tax was deducted on these payments---First Appellate Authority set aside the issue by observing that except for certain employees who did not draw their salaries, tax was deducted and deposited into government treasury---Validity---Once First Appellate Authority observed that tax was duly deducted on payment, it should have deleted the addition instead of subjecting the taxpayer to another round of cumbersome proceedings---Such practice was deprecated---Order of First Appellate Authority was vacated on the issue and department was directed to allow the expense.

Ayeshbee (Pvt.) Ltd. v. Income Tax Appellate Tribunal and others 2002 PTD 407 and 2006 PTD (Trib.) 356 rel.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Compensated absence---Disallowance of---Taxpayer contended that it was ascertained liabilities that were allowable as expense and merited acceptance---Validity---No justification existed for disallowance of such deduction, same should have been allowed as such.

2011 PTR 222 rel.

CIT v. Oriental Dyes and Chemicals Co. Ltd. (1992) 65 Tax 254 and Commissioner Legal Division v. Civil Aviation Authority 2008 PTD 647 ref.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Post retirement medical benefit---Disallowance of---Taxpayer claimed that these were ascertainable liabilities and not mere provisions; and it was the substance that matters and not the mere nomenclature given to any transaction; and any ascertainable accrued liability was deductible under the mercantile system of accounts---Revenue contended that instead of providing employee-wise detail of expenses on actual basis, the taxpayer provided total figure worked out by actuaries---Validity---Held, substance mattered rather that nomenclature given to any transaction---Liability could not become unascertainable if it was named as provision---Department was directed to allow such deduction.

2001 PTD 1427; 2001 PTD 744 and I.T.As. Nos.1516 to 1520/KB of 2003 dated 23-11-2005 rel.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Tax-payer a Bank---Penalties paid to State Bank of Pakistan---Disallowance of---Issue was decided by the Supreme Court against the taxpayer; and order of First Appellate Authority on the issue was confirmed by the Appellate Tribunal.

CIT v. Premier Bank Ltd. and another (1999) 79 Tax 589 rel.

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

----S. 20---F.B.R. Circular No.1 of 2003 dated 31-1-2003---Deductions in computing income chargeable under the head "Income from Business"---Curtailment of tax credit in respect of taxes paid in Azad Jammu and Kashmir---Taxpayer contended that Department had been allowing the total amount of taxes paid for doubly taxed income and curtailment was unjustified---Appellate Tribunal directed the Department to allow the credit in full as there was no dispute about the quantum and evidence of payment of taxes in Azad Jammu and Kashmir---Federal Board of Revenue had already instructed that any tax paid in Azad Jammu and Kashmir should be allowed in Pakistan in totality---Disposal accordingly.

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

----S.67 & Seventh Sched., Rr.6 & 9---Apportionment of deductions---Allocation of expenses relating to capital gain and presumptive tax regime income---Tax-payer a Bank---Department disallowed expenses for alleged relatedness with exemption capital gain and dividend---Taxpayer contended that as passive incomes, namely capital gain and dividend, were received out of self generated resources, no apportionment was attracted on account of financial charges; and not a single investment was made from borrowed funds; and investment made out of own funds resulted in either capital gain or dividend income without incurring any financial cost; and with regard to allocation of administrative expenses, branch network or head office was not at all engaged in placement of funds; and investment portfolio was handled exclusively by Treasury Department---Validity---Interpretation of department that such allocation could be made under R.9 of the Seventh Schedule of the Income Tax Ordinance, 2001 was untenable under the law---Rule 6 of the Seventh Schedule of the Income Tax Ordinance, 2001 specifically provide 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 read with R.9 of the Seventh Schedule to the Income Tax Ordinance, 2001 was legally untenable---Allocation of expenses to dividend and capital gains was deleted by the Appellate Tribunal.

2011 PTR 222; 2006 PTD 2678; 2006 PTD (Trib.) 356 and 2005 PTD (Trib.) 2041 rel.

2005 PTD 2161 and 2005 PTD 2599 ref.

(l) Income Tax---

----Amalgamation---Taxpayer a Bank---Transfer of assets to allied international bank PLC a joint venture company---Addition---Set aside of---Taxpayer amalgamated his banking business with another bank in United Kingdom to form a limited company to meet the local statutory requirement---Department stated that assets were not transferred on fair market value and estimated the income on this transaction without any definite basis---Taxpayer contended that First Appellate Authority had observed that shares were acquired by both the banks according to the net worth of their branches in UK and there was no question of earning any income from this transaction; after narrating such correct nature of transaction, he was not justified to set aside the issue---Validity---Department made addition on assertion that assets were transferred at higher amount than the book value whereas it lacked any evidence to this effect---Present was a case of amalgamation of existing business, in view of such undisputed position of transaction involving no element of income accrual in the hands of taxpayer/bank, order of First Appellate Authority setting aside the matter was vacated by the Appellate Tribunal and ordered that addition made by the department shall stand deleted.

2006 PTD (Trib.) 356 rel.

(m) Income Tax---

----Non-performing loans, off balance sheet items, diminution in value of investment and other assets---Reversal of provisions---Department taxed reversal of provision against non performing loans, other assets, off balance sheet items and diminution in value of investment treating them as "income"---Taxpayer/bank contended that it had already offered reversals for tax when it reduced the charge for the year by that amount---Validity---Said issue had already been decided in favour of taxpayer/banks---By following earlier precedent, addition was deleted by the Appellate Tribunal.

2011 PTR 222 and 2005 PTD 2161 (Trib.) rel.

(n) Income Tax---

----Amortization of expenses---Setting aside of---Expenses were claimed under the head "Amortization of Deferred Cost" in administrative expenses which represented cost of Golden Handshake in prior years---Revenue observed that taxpayer already claimed the entire amount in tax computation in previous year under the "Optional Retirement Scheme"; and the same was disallowed for the reason of non-deduction of tax---First Appellate Authority set aside the addition being under the head "Optional Retirement Scheme" in previous year was also set aside---Validity---Disallowance by the department for the previous years was disapproved in previous year---Claim in question having been allowed in previous year, the same was not allowable.

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

----S.70---Banking Companies Ordinance (LVII of 1962), Ss.35 & 91A---State Bank of Pakistan Act (XXXIII of 1956), Ss.46B & 54A---Recouped expenditure---Provision against 'off balance sheet items' was claimed as deduction from income---Claim was disallowed by the department---Addition was confirmed by the First Appellate Authority on the ground that the same was provision and not an actual expense---Department contended that an expense could only be claimed if all the events that determine liability had occurred and the amount of liability could be determined with reasonable accuracy---Taxpayer contended that provision was according to Prudential Regulations of State Bank of Pakistan which was allowable vide S.91A read with S.35 of Banking Companies Ordinance, 1962 and Ss.46B and 54A of State Bank of Pakistan Act, 1956 which was ascertainable liability and not a provision; that it was the substance that mattered and not mere nomenclature given to any transaction; that any ascertainable accrued liability was deductible under mercantile system of account; that even disputed liabilities were allowable under mercantile system of account; and that any subsequent recovery would taxed under S.70 of the Income Tax Ordinance, 2001---Validity---Appellate Tribunal accepted the arguments of the taxpayer and held that present was an ascertainable liability and directed to delete the additions for all the years under appeal.

2001 PTD 1427; 2001 PTD 744 and 2001 PTD 3326 rel.

(p) Income Tax---

----Acquisition of assets in settlement of non-performing loans---Addition---Setting aside of---Addition was made on the ground that acquisition of assets in settlement of non-performing loans was a recovery out of non-performing loans which were earlier charged to Profit and Loss account---First Appellate Authority observed that amount representing assets acquired in settlement of non-performing advances was never charged as provision against non-performing advance; that taxpayer provided copies of ledger of parties whose properties were acquired in settlement of non-performing loans and advances; that provisions shown was "NIL" which demonstrated that the provision originally created stood reversed to the extent of originally created against the amount of advances less the amount of liquid assets and forced sale value of assets; and that addition was based without appraisal of factual position---Taxpayer contended that after such observations, First Appellate Authority should have deleted the addition instead of remanding the case back to Assessing Officer---Validity---After observing that addition was not warranted by facts of the case, the First Appellate Authority should have deleted the addition instead of subjecting the taxpayer to another round of litigation---Even otherwise, present issue had already been decided in favour of the taxpayer---Addition was deleted by the Appellate Tribunal.

2006 PTD (Trib.) 356 and 2005 PTD 2161 rel.

(q) Income Tax---

----Amount written off---Disallowance of---Taxpayer contended that amount was shown in audited accounts only for disclosure purposes; and income for the years was not reduced by that amount---First Appellate Authority confirmed the addition for tax year 2007 and deleted for tax years 2005, 2009 and 2010---Validity---Amount shown in audited accounts were only for disclosure purposes and were never claimed as expense---Income was not reduced by the said amounts---Addition was deleted for tax year 2007 and order of First Appellate Authority was confirmed for tax years 2005, 2009 and 2010.

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

----Ss.22(1)(c) & 122(5A)---Income Tax Rules, 2002, R.34---Depreciation---Lease operations---Loss---Disallowance on the ground that initial depreciation was claimed by the taxpayer whereas the vehicles were not used by it for hiring---Taxpayer contended that though the vehicle was used by the lessee yet by fiction of law, it was considered as used by the lessor; that assessing authority made fishing enquiries in proceedings under S.122(5A) of the Income Tax Ordinance, 2001 which was not permissible; and that furnishing of depreciation chart was not the requirement of R.34 of the Income Tax Rules, 2002 as there was no annexure relating thereto---Validity---In accordance with S.22(1)(c) of the Income Tax Ordinance, 2001, the asset was treated as used in the lessor's business---Initial allowance available on use of assets was available to it---Entire exercise conducted regarding depreciation chart and entries therein was fishing enquiries which were not permissible in revisionary proceedings under S.122(5A) of the Income Tax Ordinance, 2001---Addition was deleted by the Appellate Tribunal.

2008 PTD (Trib.) 1491 rel.

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

----S.100A, Seventh Sched., R.9---Special provisions relating to banking business---Computation in violation of Seventh Schedule---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 scheduler assessment in the case of banks from tax year 2009 came at par with insurance companies taxed under the Fourth Schedule to the Income Tax Ordinance, 2001; that Seventh Schedule of the Income Tax Ordinance, 2001 did not permit re-computation of income as done by the department in view of explicit language of S.100A of the Income Tax Ordinance, 2001 read with R.1 of the Seventh Schedule of the Income Tax Ordinance, 2001; that department could make only permissible additions and adjustments as provided in Seventh Schedule itself; and that under scheduler assessments, the acceptance of accounts was a fait accompli for tax authorities---Revenue contended that provisions of S.100A of the Income Tax Ordinance, 2001 were not overriding and in view of R.9 of the Seventh Schedule of the Income Tax Ordinance, 2001 and that all the provisions of the Income Tax Ordinance, 2001 were applicable---Validity---Appellate Tribunal by following its earlier judgment allowed grounds of taxpayer for both the years under appeal.

2011 PTR 222 (Trib.) and CIT Central Zone 'A' Karachi v. Phoenix Assurance Co. Lt. 1991 PTD 1028 rel.

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

----Ss.100A, 99 & Seventh Sched., R.1---International Accounting Standards 39 and 40---Special provisions relating to banking business---Unrealized loss on revaluation of investment---Disallowance of---Taxpayer (Bank) contended that disallowance of unrealized loss on revaluation of investment was against R.1 of the Seventh Schedule of the Income Tax Ordinance, 2001; and 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 the tax payable in the case of banks were concerned; that department could make adjustments and addition in net profit as per books of account that were specifically mentioned in R.1(a) to R.1(h) of the Seventh Schedule to the Income Tax Ordinance, 2001; and that said provision was inadmissible as per R.1(g) of the Seventh Schedule of the Income Tax Ordinance, 2001---Revenue contended that International Accounting Standards 39 and 40 mentioned in R.1(g) of the Seventh Schedule to the Income Tax Ordinance, 2001 was still not implemented in Pakistan and reliance on the said rule was not justified---Validity---Orders of the department had no mention of any Rule of the Seventh Schedule or section of the Income Tax Ordinance, 2001---Language of S.100A of the Income Tax Ordinance, 2001 read with Seventh Schedule of the Income Tax Ordinance, 2001 was exactly the same as S.99 read with the Fourth Schedule to the Income Tax Ordinance, 2001---Present issue having already been decided in favour to taxpayer/banks, by following the same, Appellate Tribunal ordered the deletion of the addition.

2006 PTD 354; 2002 PTD 925; 2000 PTD (Trib.) 2668; (2002) 85 Tax 245; I.T.A. No.3819/LB of 1997 dated 7-12-1999 and I.T.A. No.400/LB of 2000 dated 10-12-2001 distinguished.

2011 PTR (Trib.) 222 rel.

(u) Income Tax---

----Defined benefit plan---Disallowance of; and deletion of addition of gratuity fund, benevolent fund, post retirement medical and contribution to pension fund---Disallowance of 'Defined Benefit Plan' was confirmed by the First Appellate Authority where for tax years 2005 and 2009, the disallowance was disapproved---Taxpayer contended that these were contributions to the approved funds and both the authorities erred in holding that these were inadmissible---Validity---Held, it was undisputed that payments were made to approved funds and law recognized their allowability---Post-Retirement Medical Benefit' was also an allowable deduction which were allowed by the Appellate Tribunal.

2011 PTR 222 (Trib.); I.T.As. Nos.1516 to 1520/KB of 2003 dated 23-11-2005 and CIT Central Zone 'A' Karachi v. Phoenix Assurance Co. Lt. 1991 PTD 1028 rel.

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

----S.24---Intangibles---Amortization of expenses---Amortization was claimed by adopting life of computer software as three years---Taxation Officer adopted life as 10 years as he was of the view that life of computer software could not be determined---Additions were vacated by the First Appellate Authority on the ground that estimation of life of intangible asset was to be determined by the taxpayer---Taxpayer contended that S.24(3) of the Income Tax Ordinance, 2001 provided the terms "normal useful life in whole years" that was three years in taxpayer's case; that application of ten years came into play where a normal life of an intangible was more than ten years or where the same was not ascertainable; and that in those conditions, it would be restricted to ten years as per S.24(5) of the Income Tax Ordinance, 2001---Validity---Application of 10 years came into play where a normal life of an intangible was more than ten years or where the same was not ascertainable---Life of computer software in the case of taxpayer was only three years which could not be stretched to 10 years---In the present world technological advances were so fast that even before three years such a programme became outdated---Addition made being not maintainable, order of First Appellate Authority was confirmed by the Appellate Tribunal.

(w) Income Tax---

----Accounting amortization---Actual accounting amortization---Addition was made on the ground that in computation chart of taxable income accounting amortization was added instead of actual accounting amortization---Taxpayer, before First Appellate Authority, pointed out that actually, the total accounting depreciation and accounting amortization was the same but accounting amortization was mistakenly taken less than the actual; and there was also an error wherein accounting depreciation was added more instead of actual figure---First Appellate Authority after examination of audited accounts and computation chart, deleted the addition---Validity---First Appellate Authority was right in deleting the addition---Revenue could not refute the factual position---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

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

----S.128 (1)---Procedure in appeal---Revenue contended that appeals were decided by the First Appellate Authority without issuing notice to the Department---Taxpayer contended that First Appellate Authority issued notice to both the parties and department opted not to appear; and this fact was available on record---Since department did not provide any evidence in support of its claim, Appellate Tribunal dismissed the appeals.

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

----Third Sched.---Depreciation expenses---Portion of depreciation allowance was disallowed on the ground that the detail of individual assets and depreciation thereon was not provided by the taxpayer---Taxpayer contended that it maintained the system of charging depreciation on same methods as prescribed in Third Schedule to the Income Tax Ordinance, 1979---Revenue contended that in absence of asset-wise detail it could not be ascertained whether statutory limit of claiming depreciation for vehicles had been maintained or not---First Appellate Authority observed that except for vehicles, there was no material difference between accounting and tax depreciation; and reduced the addition from Rs. 10 million to 8 million---Validity---Except for vehicles, there was no material difference between accounting and tax depreciation---Order of First Appellate Authority was un-exceptionable and was maintained by the Appellate Tribunal.

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

----Ss.24(c) & 52---Deductions not admissible---Interest and rent expenses were disallowed on the ground that bank (taxpayer) failed to prove that tax was deducted thereon---First Appellate Authority observed that these payments had already been subject to tax under S.52 of the Income Tax Ordinance, 1979 and deleted the addition---Validity---Once the department exercised the option to charge amounts of certain payment to tax under S.52 of the Income Tax Ordinance, 1979 by holding the assessee-in-default then the said sum could not be disallowed under S.24(c) of the Income Tax Ordinance, 1979---Order of First Appellate Authority was confirmed by the Appellate Tribunal and departmental appeal was dismissed.

(2002) 87 Tax 23 (Trib.) rel.

(aa) Income Tax---

----Dividend---Taxation of, at concessional rate---Bank (taxpayer) offered dividend income as per rate prescribed under the law---Assessing Officer taxed it at normal rate holding same to be part of composite business income---First Appellate Authority directed to apply concessionary rate on dividend income---Issue had authoritatively been decided by the High Court in favour of taxpayer---Departmental appeal was dismissed by the Appellate Tribunal.

CIT v. Bank of Punjab 2011 PTD 53 rel.

(bb) Income Tax---

----Bad debts---Unrealized interest written off---Setting aside of---Deletion of provision for bad debts---Question "whether receivable amount could be written off by debiting it in the Profit and Loss account as expenditure with the nomenclature "provision for bad debts' or not" was answered in favour of bank by a Larger Bench after examin-ing various judgments---All the departmental appeals failed and that of taxpayer were succeeded in circumstances.

2011 PTR 165 (Trib.) rel.

(cc) Income Tax---

----Profit and loss account---Additions, deletion of---Various additions were made in profit and loss account which were deleted by the First Appellate Authority with the observation that those were made arbitrarily by using stock phrases "unverifiable" and "un-vouched" without pointing out specific instances---Validity---Additions were deleted in another case, after making almost the same observations---By following earlier judgments and keeping in view the factual position elaborated by the First Appellate Authority, additions were deleted.

2003 PTD (Trib.) 1189; I.T.A. No. 1913/KB of 1998 dated 19-7-1999 and 2006 PTD (Trib.) 1292 rel.

(dd) Income Tax---

----Contribution towards unapproved superannuation fund---Deletion of addition---Extra amount was contributed towards the superannuation fund and expense out of the same in six consecutive years, which was disallowed on the ground that prior permission for the contribution was not obtained from the Commissioner---Taxpayer contended that taxpayer/bank applied for approval of extra contribution which was granted by the Commissioner---Addition was deleted by the First Appellate Authority as approval of extra contribution was granted---After approval letter issued by the Commissioner, there was no reason for interference in order of First Appellate Authority which was confirmed by the Appellate Tribunal in circumstances.

(ee) Income Tax---

----Amortization of premium on investment---Department disallowed amortization of premium on investment on the ground that expenditure paid on acquiring the securities was capital in nature---Taxpayer contended that it had purchased secondary market government securities at premium and amount of premium paid was amortized over the life of securities---First Appellate Authority allowed amortization of premium---Departmental appeal was dismissed by the Appellate Tribunal by following the earlier judgment on the issue.

(2004) 90 Tax 116 (Trib.) rel.

(ff) Income Tax---

----Depreciation on vehicles---Disallowance of 50% due to use of Directors (taxpayer a Bank)---Up to 50% depreciation of vehicles was disallowed for personal use of vehicles by the employees---Taxpayer contended that disallowance was based on misreading of law as vehicles were given to employees as per terms and conditions of their services; that mere fact that benefit was given in kind did not mean that it was not wholly and exclusively for business purposes; that bank provided vehicles to employees as a salary package under contract of their employment which was an allowable expense; that use of cars by some employees, both for private and business use, did not disentitle the Bank from depreciation allowance; that taxation of the same in the hands of an employee was altogether a different subject which had no bearing on deductibility in the hands of employer and that conveyance provided to the employees (partly for business and partly for private use) was an allowable expenditure as it was meant wholly and exclusively for business---Validity---Order of First Appellate Authority being in accordance with law and no interference was called for by the Tribunal---Departmental appeals were dismissed by the Appellate Tribunal.

I.T.As. Nos. 36 to 38/LB of 2003 and 2005 PTD (Trib.) 2041 rel.

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

----S.122(5A)---Amendment of assessment---Opportunity of hearing---Adjustment of loss of leasing company---Deletion of addition---Taxable income was reduced by claiming the "loss carried forward (Modarba)"---Loss was disallowed on the ground that no evidence was produced---Taxpayer contended that disallowance was not confronted in notice under S.122(5A) of the Income Tax Ordinance, 2001; and invoking of S.122(5A) of the Income Tax Ordinance, 2001 on a matter without issuance of notice was not justified and that evidence had already been filed with the return---First Appellate Authority deleted the addition with the observation that addition without providing an opportunity of hearing was unjustified---Validity---Any addition without issuing statutory notice was unlawful---Undisputedly no notice required under S.122(9) of the Income Tax Ordinance, 2001 was issued---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 rel.

(hh) Income Tax---

----Income on foreign currencies---Remarks of concealment---Expunction of---Taxpayer, a Bank, while declaring income, deducted exchange gain from its accounting income---Department not only included said income but also treated same as concealment of income---Taxpayer contended that exchange gain was a notional income---Addition was confirmed by the First Appellate Authority, however, expunged the remarks of Taxation Officer regarding concealment---Department agitated against expunging of such remarks---Validity---Exchange gain was only a notional income and was not taxable under the income tax law---Exchange gain was not taxable---No justification existed for initiation of concealment proceedings for exclusion of said notional income from its accounting income---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

2006 PTD 288 rel.

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

----S.61---Charitable donations---Foreign tax credits and credit under S.61 of the Income Tax Ordinance, 2001---Department disallowed foreign tax credits and credit under S.61 of the Income Tax Ordinance, 2001---First Appellate Authority directed to allow such credits subject to qualification under the law---No infirmity existed in order of First Appellate Authority and the same was confirmed by the Appellate Tribunal.

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

----S.221---Rectification of mistake---Scope---Department agitated order on the ground that reliance was wrongly made on decision of High Court---Validity---No overlooking of a binding judgment had taken place as claimed by the department---All the judgments were considered and commented upon---Appellate Tribunal could not review its own judgment---Scope of S.221 of the Income Tax Ordinance, 2001 could not be extended to matter where new arguments were to be considered and deliberation was to be made afresh and there was no mistake apparent from record---Miscellaneous application was rejected by the Appellate Tribunal.

CIT v. National Food Laboratories (1992) 65 Tax 257 and CIT v. Shadman Cotton Mills, Karachi (2008) 97 Tax 201 rel.

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

----Seventh Sched, R.1(c) & S.221---Rules for the computation of the profits and gains of a banking company and tax payable thereon---Allowance of provision for non-performing advances at 1% of gross advances instead of net advances---First Appellate Authority observed that provision for advances and off balance sheet items was allowable up to a maximum of 1% of total advances and it was directed that provision be computed accordingly on the value of total advances as per accounts at the time of appeal effect---Since appeal against original order of First Appellate Authority was pending before Appellate Tribunal, the department instead of filing a fresh appeal against subsequent order of First Appellate Authority filed a miscellaneous application for raising additional ground contesting observations of First Appellate Authority---Validity---Observations of First Appellate Authority were in accordance with R.1(c) of the Seventh Schedule of the Income Tax Ordinance, 2001 that mentions "total advances"---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

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

----Ss.171 & 137(1)---Additional payment for delayed refunds---Due date for payment of tax---Bank (tax-payer) claimed credit of compensation for delayed payment of refund against its admitted tax liability---Department disallowed the claim as no order under S.171 of the Income Tax Ordinance, 2001 was passed---First Appellate Authority observed that department could not take benefit of its own wrong---On the one hand department did not issue notice order under S.171 of the Income Tax Ordinance, 2001 and on the other hand took benefit of its own wrong by not allowing credit against tax liability---Department was directed to allow credit of compensation due to the bank (tax-payer) under S.171 of the Income Tax Ordinance, 2001---Validity---Department was legally obliged to give compensation on delayed payment of refund---Order of First Appellate Authority being in accordance with law, departmental appeal failed.

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

----S.171---Additional payment for delayed refunds---Rate of compensation---Refund was determined as a result of order of Appellate Tribunal---Refund was subsequently adjusted against demand---Taxpayer claimed compensation on delayed refund---Department allowed compensation, however, compensation was calculated @ 6% instead of KIBOR rate that prevailed for the tax year---Taxpayer contended that compensation should have been calculated as per rate prevalent on the date when refund became due---First Appellate Authority directed to allow compensation on the basis of law as amended vide Finance Act, 2009---Appeal---Taxpayer contended that mala fide of the department was clear from the treatment as when the rate of compensation was reduced the department adopted rate prevalent during the period compensation accrued; that when rate of compensation was enhanced, it refused to apply rate prevalent during that period and took just opposite position in that rate prevalent in tax year 2008 was applicable; and that refund became due on 17-8-2009, the rate applicable on that date was to be applied---Validity---Appellate Tribunal endorsed the observation of First Appellate Authority that compensation under S.171 of the Income Tax Ordinance, 2001 was allowable on rate prevalent at the time the refund became due---Departmental appeal failed.

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

----Ss.161, 205 & 21(c)---Failure to pay tax collected or deducted---Payment of 'profit on debt' and profit and loss expenses---Department asked the bank to reconcile the payment of tax with that of expenses showed in its audited accounts---Department, after examining reconciliations and supporting documents, passed order under Ss.161/205 of the Income Tax Ordinance, 2001 by treating the bank as assessee-in-default in respect of profit on debt and other profit and loss expenses---Taxpayer contended that in case of bank due to large operations of branches all over Pakistan, demand of each and every evidence was not justified when onus otherwise was on the department to show any default; that 97.02% claim was verified as per own admission of the Department; that reason for not furnishing detail of balance 2.98% claim was also submitted but was ignored by the Department; and that there was no justification to treat the tax-payer as assessee-in-default---Validity---Order under Ss.161/205 of the Income Tax Ordinance, 2001 both on legal and factual grounds was not sustainable---Veracity of compliance of withholding provisions were proved---After verification of 97.02% of the claim of profit on debt expenses, disallowance of remaining claim of 2.98% was not justified, especially when the Department did not cite any instance of non-deduction of tax---Department failed to point out even a single instance where it possessed evidence to show that tax was not deducted---Invoking of S.161 of the Income Tax Ordinance, 2001 in respect of profit on debt expenses was disapproved by the Appellate Tribunal.

Muhammad Tahir, D.R. for Appellants.

Dr. Ikramul Haq for Respondents.

Date of hearing: 15th May, 2012.

2013 P T D (Trib.) 304

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

Messrs DECENT TEXTILE, FAISALABAD

Versus

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

S.T.As. Nos.907/LB to 913/LB and M.As. (Stay) Nos.814/LB to 820/LB of 2012, decided on 12th September 2012.

Sales Tax Act (VII of 1990)---

----S.45-B---Appeal---Miscellaneous application for grant of stay, rejection of---During pendency of first appeal, registered person filed application for grant of stay against recovery of tax demand, which was refused---Taxpayer contended that while rejecting stay application, First Appellate Authority had failed to pass a speaking order; and taxpayer had a prima facie arguable case with every likelihood of success and balance of convenience also leaned in its favour; and if the department was not restrained from recovery of the disputed amount, same will cause irreparable loss; and findings of First Appellate Authority were devoid of any plausible reason---Revenue contended that First Appellate Authority was competent to reject such applications without assigning any reason---Validity---Registered person deserved relief as applied for---Orders for all the periods were vacated and department was restrained from recovery of disputed tax demand for a period of 30 days or decision of appeal by the First Appellate Authority, whichever was earlier---First Appellate Authority was directed to preferably decide the pending appeals at the earliest---Appeals of the Registered Person having been disposed of and department having been restrained from recovery of tax demand, miscellaneous applications seeking stay against recovery of tax demand also became infructuous.

PLD 2003 SC 344; 2005 PTD 165; 1996 CLC 507; 2006 PTD 670; 2003 PTD 1664; 2008 PTD 1; 2002 PTD 679; 1991 PTD 872 and 2012 PTD (Trib.) 941 ref.

Khubaib Ahmad for Applicant (in S.T.As. Nos.907/LB to 913/LB of 2012 and M.As. Nos.814 to 820 of 2012).

Mrs. Naheed Rakho, D.R. for Respondent (in S.T.As. Nos.907/LB to 913/LB of 2012 and M.As. Nos.814 to 820 of 2012).

Date of hearing: 12th September, 2012.

2013 P T D (Trib.) 306

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and M.B. Tahir, Accountant Member

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

Versus

Messrs PROGRESSIVE WEAVERS (PVT.) LTD., FAISALABAD

M.As. Nos.569/LB of 2011 and 9/LB to 11/LB of 2012, decided on 25th June, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake---Application for recall of order---Department requested for expunction of some paragraphs from the order as the career of the Departmental Representative and Assessing Officer was in danger since they were called by the Federal Tax Ombudsman in contempt---Taxpayer stated that merits of main appeal shall not be prejudiced if such paragraphs were expunged at the request of department and after getting relief in first two appeals, latter appeals were not pressed by him---Validity---Appellate Tribunal treated the statement of taxpayer, that second set of appeals were not pressed, as mistake had been rectified under S.221 of the Income Tax Ordinance, 2001---Since department, requested for expunction of remarks in some paragraphs and it had not challenged the recommendations of Federal Tax Ombudsman before the President, such paragraphs were expunged from the order and were replaced by the paragraph " second set of appeals are dismissed being not pressed by learned counsel for appellant taxpayer".

Asif Hashmi, L.A. for Applicant.

Imran Rashid for Respondent.

Date of hearing: 25th June, 2012.

2013 P T D (Trib.) 309

[Inland Revenue Appellate Tribunal of Pakistan]

Before Zafar Iqbal, Judicial Member and Farzana Jabeen, Accountant Member

Messrs MATIARI SUGAR MILLS LTD.

Versus

COMMISSIONER OF INLAND REVENUE (SALES TAX), HYDERABAD

M.A.(Rect) No.76-KB of 2011, decided on 29th June, 2012.

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

----S.3(1A)---Further tax---Wrongful charging of tax---Finding recorded by the Appellate Tribunal.

Fatima Sugar Mills' case GST 2003 P. 415 and Northern Bottling Co. (Pvt.) Ltd. v. FOP 2004 PTD 226 ref.

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

----Ss.3(1A) & 2(25)---Sales Tax Refund Rules, 2000, R.8(2)---Further tax---Wrongful charging of tax---Refund of---Application for recall and rectification, evidence in accordance with the rules of Appellate Tribunal---No counter affidavit had been filed on behalf of department---Refund had been disapproved and refused on some crucial mistakes of law and facts---Absolute abuse of the principles of natural justice---Earlier order was recalled and the mistake was rectified in the order and it was directed that the lower authorities refund to the taxpayer the amount wrongly charged.

Fatima Sugar Mills' case GST 2003 P. 415 and Northern Bottling Co. (Pvt.) Ltd. v. FOP 2004 PTD 226 ref.

Muhammad Naseem for Appellant.

Absent for Respondent.

Date of hearing: 26th June, 2012.

2013 P T D (Trib.) 313

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

Messrs POLYMER MARKETING (PVT.) LTD., LAHORE

Versus

D.C.I.R., UNIT-06, ZONE-VII, R.T.O.-II, LAHORE

S.T.A. No. 924/LB of 2012 and M.A. (Stay) No.885/LB of 2012, decided on 2nd October, 2012.

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

----Ss.8(1)(ca) & 73---Tax credit not allowed---Adjustment of input tax was called in question and it was confronted that tax against the invoices was not deposited in treasury and that provisions of S.8(1)(ca) of the Sales Tax Act, 1990 were invoked---Registered person contended that material in question was imported and the tax was deposited at the import stage but could not produce the documents of import showing deposit of tax and contended that provisions of S.73 of the Sales Tax Act, 1990 were complied with and provided all the documents available to them from the suppliers as well as the documents recoverable from website etc.; and harsh provisions of S.8(1)(ca) could not be attracted; and Department should have prosecuted the suppliers for any default or non-payment of tax---Revenue contended that Registered Person could not substantiate its assertion that the tax was paid at import stage---Validity---Section 8 of the Sales Tax Act, 1990 starts with non-obstante subsection (1) and provide a list of eventualities upon which entitlement of the Registered Person to reclaim or deduct input tax was denied---Under Cl.(ca) of subsection (1) of S.8 of the Sales Tax Act, 1990 adjustment was denied simply for the reason that supplier had not deposited the tax in government treasury in respect of any invoice issued for goods or services---No exception held, could be drawn from a clear and unambiguous provision of S.8(1)(ca) of the Sales Tax Act, 1990, if the tax was not deposited in government treasury by respective suppliers.

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

----S.8(1)(ca)---Tax credit not allowed---Non-payment of tax by the supplier---Non-confrontation of the Registered Person in form of evidence---Validity---Department was required to confront the Registered Person with cogent prima facie evidence to show that tax against the transaction/invoice in question was not deposited in national exchequer---Department could not be given a free hand to presume that the tax was not deposited and shift the onus on Registered Person---Prima facie evidence apparently was not confronted to the Registered Person and on the other hand, Registered Person could not substantiate his claim of payment of tax at import stage---Registered Person should be provided another opportunity to place his defense before the Taxation Officer and the Taxation Officer was required to confront the Registered Person on the basis of a prima facie evidence that tax was not paid to rule out that the show cause notice was not issued on any presumption---Once prima facie proof was confronted to the taxpayer, the onus shall shift on the Registered Person who will have to prove the same otherwise---If it was proved that tax was not deposited in the government treasury by the suppliers, no other interpretation of said clause could be made and the recipient Registered Person should be caught in the mischief of the provisions of S.8(1)(ca) of the Sales Tax Act, 1990 and could not be allowed adjustment---Both the orders below were vacated and the case was remanded to Taxation Officer to re-adjudicate in accordance with the given instructions and guidelines.

(e) Interpretation of Statutes---

----Taxation Laws---Equity---Scope---Equity had no role to play under the cannons of interpretation of taxation law---Letter of law was to be followed literally, even if the same was harsh in nature.

??????????? Muhammad Ajmal Khan along with Farooq Sheikh for Applicants.

??????????? Nadeem Arif, D.R. (RTO) for Respondent.

??????????? Date of hearing: 2nd October, 2012.

2013 P T D (Trib.) 316

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Sohail Afzal, Accountant Member

Messrs CHENAB BOARD, FAISALABAD

Versus

C.I.R.(A), R.T.O., FAISALABAD

S.T.A. No.638/LB of 2012, decided on 12th October, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 11(2), 36(1), 45 & 72A---S.R.O. No. 555(I)/1996 dated 1-7-1996---S.R.O. No.594(I)/2012 dated 1-6-2012---Tax fraud---Assessment of tax---Pecuniary jurisdiction---Admittedly the tax involved was much beyond the monetary limit prescribed for adjudication of the cases by the Assistant Commissioner, Inland Revenue at Serial No.2 of the table to S.R.O. 555(I)/1996 dated 1-7-1996 and the said S.R.O. remained in field till 1-6-2012 when it was rescinded by the Federal Government vide S.R.O. 594(I)/2012 dated 1-6-2012---Federal Government specifically mentioned that rescinded S.R.O. shall take effect on and from the 2nd day of June, 2012 meaning thereby that the earlier notification prescribing the pecuniary jurisdiction of various officers was very much in the field till 1-6-2012---Show-cause notice and superstructure built theirupon by way of original order and order of First Appellate Authority was without jurisdiction and coram non judice---Show-cause notice and order-in-original passed by the Assistant Commissioner Inland Revenue were beyond his pecuniary jurisdiction as mentioned in S.R.O. 555(I)/1996 dated 1-7-1996 and being so it was an order coram non judice and without lawful authority---Acts of omission and commission taken without jurisdiction were illegal, void ab initio and no action could be taken against the taxpayer in pursuance thereof---Appeal was accepted by the Appellate Tribunal---Order passed by the First Appellate Authority was set aside and order-in-original was declared null and void and of no legal consequence.

Izhar Alam Farooqi, Advocate v. Sheikh Abdul Sattar Lasi and others 2008 SCMR 240; Messrs Kamran Industries v. Collector of Customs (Exports), Karachi and 4 others PTCL 1996 CL 1; Sardar Ahmad Yar Khan Jogezai v. Province of Balochistan 2002 SCMR 122; Faqir Abdul Majeed Khan v. Distt. Returning Officer and others 2006 SCMR 1713; Messrs Global (Pvt.) Ltd. and another v. Commissioner, Inland Revenue, RTO, Multan S.T.A. No.530/LB of 2011 and S.T.A. No.578/LB of 2011 and Messrs Ibrahim Steel Casting, Dewab Nagar Road, More Emanabad, Gujranwala v. Commissioner Inland Revenue (Appeals), Lahore S.T.A. No.55/LB of 2012 rel.

Khubaib Ahmad and Rana Muhammad Arshad, ITP for Appellant.

Sarfraz Ahmad Qazi, DR for Respondent.

Date of hearing: 12th October, 2012.

2013 P T D (Trib.) 353

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Member Judicial and Zarina N. Zaidi, Accountant Member

Messrs SHELL (PAKISTAN) LIMITED

Versus

COMMISSIONER OF SALES TAX (INLAND REVENUE SERVICES) ZONE-IV

M.A. (Stay) No.116/KB and S.T.A. No.145/KB of 2011, decided on 17th February, 2012.

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

----Ss.10, 3 & 4(1) (b)---Customs Act (IV of 1969), Ss.24, 27 & 131---Sales Tax Rules, 2002, R.37---Refund of input tax---Zero-rated exports---Interference in clearance of goods by Inland Revenue Department---Proper clearance of goods by customs authorities---Claim of refund, refusal of---Legality---Taxpayer company contended that supply of petroleum products for consumption abroad to Airlines proceeding to destinations outside Pakistan in terms of S.24 of the Customs Act, 1969 was zero-rated in terms of Ss. 3 and 4(1) of the Sales Tax Act, 1990---Validity---Official of Inland Revenue seemed to have relied upon non compliance of R.37 of the Sales Tax Rules, 2002 while officers of Customs department had allowed clearance on the basis of S.24 of the Customs Act, 1969---Said rule could not be applied by overlooking the provision of statute and due to its in conflict with the statute it had to give way---Refund claim having already been processed and granted could not have been refused on mere technicalities and procedural lapse---Claim lodged had already been delayed---Approval or non-approval of official of Inland Revenue would have not made a difference since said official could not have exercised any jurisdiction to interfere with the clearance---Appeal filed by taxpayer-company was properly supported by an affidavit to which Inland Revenue Department failed to file reply, or any statement or any counter affidavit---Said department had also not filed any rebuttal to the legal arguments submitted on the orders of Appellate Tribunal, and there was no explanation for such default---Impugned order set aside and Appellate Tribunal held that taxpayer was entitled to the refund as per claim.

PLD 1972 SC 271; PLD 1995 Kar. 587; PLD 1997 Lah. 1; 1997 PTD 47; 1980 PTD 406; 1984 PTD 137; 1989 PTD 1010; PTCL 2004 CL 18; 2006 PTD 1644; PLD 1952 Lah. 582; PLD 2000 SC (AJ&K) 20; 2003 CLC 1622; 2009 SCMR 1622; 2010 PTD 465; 2011 PTD 886; Crawford, the Constitution of Statutes; PLD 1972 Lah. 316; PLD 1969 Dacca 451; 1990 PTD 974; 2001 PTD (Trib.) 3810; 2003 PTD (Trib.) 279; 1991 PTD 217; 1991 PTD (Trib.) 226; (1989) 176 ITR 352 Pat. HC; (1970) 77 ITR 6 SC; (1979) 118 ITR 585 Rajastan HC; (1974) 96 ITR 78 Mad. HC; (1962) 46 ITR 152 Punjab HC Delhi; PLD 1990 SC 1034; PLD 2001 Kar. 52; 2001 SCMR 1806; 1993 SCMR 1232; 2002 PTD 2959; PLD 1998 SC 64; 2007 SCMR 729; 2005 SCMR 69; 1996 SCMR 856; (1992) 62 Taxation 57 (SC Pak); PLD 1964 SC 572; 1986 PLC (C.S.) 560; 1980 CLC 2007; 1986 CLC 745; 1986 CLC 1408; 1993 SCMR 662; 1991 MLD 1243; (1974) 94 ITR 1; (1984) 146 ITR 40 and 1986 PTD (Trib.) 119 ref.

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

----Ss.45A(4), 4 & 11---Customs Act (IV of 1969), S.24---Power of the Revenue Board and Collector of sales tax to call for records---Petroleum products---Zero-rated supplies made abroad to Airlines---Clearance of goods by Customs authorities---Assessment and levy of sales tax by the Commissioner Inland Revenue by assumption of jurisdiction over such orders---Validity---Commissioner Inland Revenue held no jurisdiction to pass an order assailing clearance of goods accorded by the officers of the Customs Department---Such matter related to Customs Act, 1969 and Commissioner Inland Revenue held no jurisdiction to object to the proper clearance of goods---Exercise of jurisdiction on part of Commissioner Inland Revenue under S.45A(4) of the Sales Tax Act, 1990 was not correct, proper and lawful since clearance was allowed by officers of the Customs department, who were not subordinate to the Inland Revenue and the Commissioner Inland Revenue held no such powers of amending or correcting their orders.

PLD 1972 Lah. 316; PLD 1969 DACCA 451; 1990 PTD 974; 2001 PTD (Trib.) 3810; 2003 PTD (Trib.) 279; 1991 PTD 217; 1991 PTD (Trib.) 226; (1989) 176 ITR 352 Pat. HC; (1970) 77 ITR 6 SC; (1979) 118 ITR 585 Rajastan HC; (1974) 96 ITR 78 Mad. HC and (1962) 46 ITR 152 Punjab HC Delhi ref.

1986 PLC (C.S.) 560; 1980 CLC 2007; 1986 CLC 745; 1986 CLC 1408; 1993 SCMR 662; 1991 MLD 1243; (1974) 94 ITR 1; (1984) 146 ITR 40 and 1986 PTD (Trib.) 119 ref.

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

----S.36---Qanun-e-Shahadat (10 of 1984), Art.119---Recovery of tax not levied or short-levied or erroneously refunded---Show cause notice based on change of opinion, and conjectures, not discharging burden of proof, in violation of Qanun-e-Shahadat Order, 1984---Validity---Show cause notice based on conjecturers and order-in-original without discharging the burden of proof and in violation of Qanun-e-Shahadat, 1984 by itself was invalid while it was also barred by limitation---Whereas it appears to be eminently based on mere change of opinion and substantially based on fishing and roving enquiries.

2001 PTD SCMR 83(sic); 2003 PTD 1257; 2003 PTD 1797; 2005 PTD 480; 2003 PTD 1593; 2002 MLD 180; PTCL 2001 CL 558; 1992 SCMR 1898; 2003 PTD 1047; 2003 PTD 1354; 2004 PTD 714; 2000 PTD 1798; 2004 PTD 3020; 1990 PTD 155 SC; 1991 PTD 217; 1993 SCMR 96; 1993 SCMR 493; 2002 PTD 661; (1957) 32 ITR 89; (1967) 64 ITR 516; I.T.A. 2400/2401/KB/91-92; 1995 PTD (Trib.) 580; 1995 PTD (Trib.) 1152; (1982) 1381 ITR 742; 2002 PTD 700; 2002 PTD 407; PLD 1996 Kar. 68; 1992 SCMR 1083; PLD 1959 SC 364; Qanun-e-Shahadat Order, 1984; 1993 PTD 206 and 1997 PTD (Trib.) 2209 ref.

(d) Sales Tax---

----Past practice---Order-in-original had been passed contrary to the past practice of many years which had been bypassed without obtaining permission of Federal Board of Revenue.

PLD 1970 SC 453; 1985 SCMR 1753; 1989 SCMR 353; PLD 1997 SC 700; PLD 1965 SC 90; 1998 SCMR 2013; 2002 PTD 955; 2002 PTD (Trib.) 625; 2004 PTD 2516; 2004 PTD 2524 and 2011 SCMR 408 ref.

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

----Ss.33 & 34---Offences and penalties---No show cause notice---Validity---Penalty and additional tax was imposed without prior show cause notice while it was also not held that the conduct of the taxpayer was contumacious, mala fide, and deliberate.

2004 SCMR 456; 2002 PTD (Trib.) 300; 2005 PTD 1984; 2005 PTD 1978; 2005 PTD 1953; 2003 PTD 1445 and 2004 PTD 2771 ref.

Muhammad Naseem for Applicant.

Badaruddin Qureshi, Addl: CIR for Respondent.

Date of hearing: 9th December, 2011.

2013 P T D (Trib.) 379

[Inland Revenue Appellate Tribunal of Pakistan]

Before Zafar Iqbal, Member Judicial and Zarina N. Zaidi, Accountant Member

Messrs SHELL (PAKISTAN) LIMITED

Versus

COLLECTOR OF SALES TAX, KARACHI

Sales Tax Nos.166/K and 167/K of 2009, decided on 27th February, 2012.

(a) Petroleum Products (Development Surcharge) Ordinance (XXV of 1961)---

-----S.4---Sales Tax Act (VII of 1990), S.3---Petroleum products---For the purposes of petroleum products the Petroleum Products (Development Surcharge) Ordinance, 1961 by virtue of its S.4 would have an overriding effect over the Sales Tax Act, 1990.

(b) Petroleum Products (Development Surcharge) Ordinance (XXV of 1961)---

----S.4---Sales Tax Act (VII of 1990), Sixth Sched., Item No.8 & S.3---S.R.O. 922(I) of 1999 dated 16-8-1999---Petroleum products---Levy of sales tax---Taxpayer not allowed to pass on such levy to end consumers---Validity---Ministry of Petroleum on 23-9-1999 prescribed a price structure notification authorizing the taxpayer to charge sales tax on furnace oil, while permitting it to pass on the burden to the end consumers---Taxpayers made a number of representations and it took the Ministry of Petroleum more than a month to issue a notification in harmony with S.R.O. 922(I)/99 dated 16-8-1999 which showed negligence and lack of harmony between the two government departments i.e. Ministry of Petroleum and Revenue authorities---Taxpayer could hardly be blamed for it or saddled with the responsibility to pay sales tax for the intervening period---On one hand the taxpayer was obligated to pay sales tax, while on the other hand it was not allowed to pass on the burden of tax to the end consumers, due to the failure of the Ministry of Petroleum to prescribe a corresponding price notification---Such position would be against the spirit of sales tax, which was an indirect tax and the taxpayer was denied the status of collecting agent of indirect tax---Appeals were allowed, show cause notices, orders-in-original and orders of First Appellate Authority were annulled and bank guarantees, if any given by the taxpayer were revoked and withdrawn.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838; Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector Adjudication 2003 PTD 1593; Caltex Oil v. Collector Central Excise 2005 PTD 480; Elahi Cotton Mills Ltd. v. FOP PLD 1997 SC 582; Frontier Ceramics v. Government of Pakistan 1999 PTD 4126; Mayfair Spinning Mills Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal PTCL 2002 CL 115; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176; Firdous Spinning and Weaving Mills v. FOP PLD 1984 Kar. 522; Chhiter Mal Narain Das v. Commissioner of Sales Tax (1970) 3 SCC 809; State of Tamil Nadu v. Cement Distributors (Pvt.) Ltd. (1973) 3 SCC 342; Central Excise Appeal K-220/04/8015 dated 30-9-2004 and CIT v. Kashmir Edible Oil Ltd. 2006 SCMR 109 rel.

PLD 1963 SC 296; PLD 1995 SC 423; 1997 PTD (Trib.) 879; PLD 1963 (W.P.) Kar. 280; PLD 1997 SC 582; 1987 SCMR 1840 and Exide Pakistan v. Deputy Collector 2004 PTD 1449 ref.

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on 25-5-2001 and the Orders-in-Original were framed on 16-7-2001---Orders-in-Original were framed after 45 days from the date of show-cause notice---In terms of proviso to S.36(3) of the Sales Tax Act, 1990, period prescribed at the time of passing of Orders-in-Original i.e. 16-7-2001, was 45 days---Orders-in-Original were barred by limitation---Although power to grant extension of time limit existed but the department had not been able to file any document whereby it could be inferred that time limit had been extended by competent authority---Assessing authority had fallen into error by ignoring time limitation---When orders-in-original were passed the limitation period prescribed by the statute was 45 days---Order was, therefore, liable to be annulled.

CIT v. Kashmir Edible Oil Ltd. 2006 SCMR 109; Pace International v. Secretary 2006 PTD 340; SS Oil Mills Ltd. v. Secretary GST 2005 CL 592; CST v. Hilal Tanneries PLD 1976 Lah. 655 and Nagina Silk Mills v. ITO PLD 1963 SC 322 rel.

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

----Sixth Sched., Item No. 8 & S.3---S.R.O. 922(I) of 1999 dated 16-8-1999---Petroleum products---Item No.8 of the Sixth Schedule to the Sales Tax Act, 1990 had granted exemption to certain petroleum products---Such exemption was conferred by statute---On 16-8-1999 vide S.R.O. 922(I) of 1999 dated 16-8-1999 the said exemption was withdrawn---Question was as to how through a subordinate legislation i.e. (a notification), a statutory provision i.e. Item No.8 of the Sixth Schedule of the Sales Tax Act, 1990 could be amended or omitted---Statutory Regulatory Order (S.R.O.) could not bring about an amendment, repeal or omission in the statute---S.R.O. 922(I) of 1999 dated 16-8-1999 which purportedly took away the said statutory exemption was of no legal effect---Basis of show-cause notice in question was based upon the said S.R.O., and all subsequent proceedings and order became a nullity.

C.I.T. v. Kashmir Edible Oil Ltd. 2006 SCMR 109 rel.

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

----Ss.33 & 34---Penalty and additional tax---Scope---When the main levy failed the imposition of penalty or additional tax also failed.

DG Khan Cement v. FOP 2004 SCMR 456 and Gandhara Nissan v. Sales Tax Department and others 2004 PTD 2371 rel.

Muhammad Naseem for Appellant.

Chaudhry Jawed, DR (LTU) for Respondent.

Date of hearing: 5th October, 2011.

2013 P T D (Trib.) 415

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs IMTIAZ AHMAD ROOHANI, MULTAN

Versus

DEPUTY COMMISSIONER INLAND REVENUE, MULTAN

I.T.A. No. 1249/LB of 2011, decided on 2nd April, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), 177(10) & 121---Amendment of assessment---"Definite information"---Taxpayer, a newspaper publisher contended that information gathered by the Revenue from Ministry of Information and Broadcasting which they stated were not valid evidence under the law of evidence and there was no detail available as to for what purpose this information was supplied and on what basis this information was made out; that information supplied by the Ministry could not be taken as "definite information" within the meanings of S.122(5) of the Income Tax Ordinance, 2001; that Revenue had not brought on record any supporting evidence relating to quantum of publication and sales which could have been made the basis to prove the stance of the Department; that whole case had been made on the basis of surmises, presumptions and conjectures which could not qualify the test of judicial scrutiny; and further, subsection (10) of S.177 of the Income Tax Ordinance, 2001 was added by Finance Act, 2010 which could not be applied retrospectively for the tax year 2005 as it 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 cases selected for audit for tax year prior to 2010---Validity---Information gathered from Ministry of Information and Broadcasting could not be made the basis for framing the case against the taxpayer---Such was not the "definite information" within the meaning of subsection (5) of S.122 of the Income Tax Ordinance, 2001---Had it been the "definite information" the Revenue should have not reduced the price of the newspaper as Rs.4 per copy instead of Rs.7 as provided by the Ministry---For framing case against the taxpayer proper supportive evidences should have been collected from different sources which had not been done---Order was annulled by the Appellate Tribunal being suffering from factual infirmities.

Niaz Ahmad Khan and Zafarul Islam for Appellants.

Asif Rasool, DR for Respondent.

Date of hearing: 2nd April, 2012.

2013 P T D (Trib.) 420

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

Messrs NESTLE PAKISTAN LTD., LAHORE

Versus

C.I.R., ZONE-II, L.T.U., LAHORE

S.T.A. No.1010/LB of 2012, decided on 19th October, 2012.

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

----S. 36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Invocation of provisions of S.36(1) of the Sales Tax Act, 1990 did not authorize the officer to issue notice for a period beyond five years---Show cause notice was admittedly issued on 28-4-2012, demand adjudged for period prior to 28-4-2007 was hit by limitation in view of express provision of law---Default adjudged against the taxpayer for tax period prior to 28-4-2007 remained illegal and unjustified---Time limitation in fiscal statutes, wherever provided, is mandatory and cannot be ignored or by passed on any basis---Order of authorities below was vacated to this extent and demand adjudged was annulled by the Appellate Tribunal being hit by limitation.

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

----Ss.4, 13, 2(41), 2(28) & Sixth Sched.---S.R.O. 548(I)/2006 dated 5-6-2006---S.R.O. 549(I)/2008 dated 11-6-2008---Zero rating---Exemption---Conflict of primary and subordinate legislation---Effect--Taxpayer engaged in manufacture/import and supply of infant food items---Supply of such items was treated as chargeable to tax at zero per cent---Effect of claim of such supply was that registered person was allowed refund of input tax relatable to these supplies / goods---Notifications were issued by the Federal Government under S.4 of the Sales Tax Act, 1990---Post issuance of refund a case was made out against registered person that supply of such goods remained exempt under S.No.25 of the Sixth Schedule to the Sales Tax Act, 1990; that such items could not be validly treated as chargeable to sales tax at zero percent under the notifications; that primary legislation prevailed over a subordinate legislation in cases where there occurs a conflict between the two; and since exemption had been prescribed in the Sixth Schedule which formed part of the primary legislation i.e. Sales Tax Act, 1990 and that since rate of zero percent was provided for in the notification, a piece of subordinate legislation, the exemption would prevail over zero-rating meaning thereby that the refund, accruing by virtue of zero-rated supplies under the notifications, was not legally admissible---Validity---Provisions of Ss.4 & 13 of the Sales Tax Act, 1990 revealed that (i) these are independent provisions dealing with independent transactions and (ii) these did not make cross reference to each other though both of these override S.3 of the Sales Tax Act, 1990---Provisions of S.3 of the Sales Tax Act, 1990 created a charger of tax, while the provisions of S.4 of the Sales Tax Act, 1990 would override said provisions to prescribe payment of tax at zero percent, which was in accordance with the scheme embodied in the statute, was a valid and existent rate applicable to certain transactions---Provisions of S.13 of the Sales Tax Act, 1990 again would override S.3 of the Sales Tax Act, 1990, in the present case, the charge remained there on the goods but the qualifying transactions were excused from payment of tax---First Appellate Authority misdirected in concluding that the effect of notifying the subject goods in the S.R.Os. was that the same created a charge on these goods which was not there by virtue of exemption contained in the Sixth Schedule of the Sales Tax Act, 1990---No matter there was applicable an exemption the subject goods were already chargeable to tax---Only the payment against said charge was done away with by virtue of extending the exemption---Whole case was built by the First Appellate Authority on such premise and suffered from serious infirmity---Appellate Tribunal did not fortify with analysis made by the First Appellate Authority with reference to the definition of 'taxable supply' provided for in S.2(41) of the Sales Tax Act, 1990 that since supply of goods that were exempt from sales tax under S.13 of the Sales Tax Act, 1990 were excluded from the ambit of 'taxable supply' and were beyond the scope of charging S.3 of the Sales Tax Act, 1990 that created charge on taxable supplies---Such was not the case as the aforesaid provisions had neutral effect as far as the zero-rated goods were concerned because of their specific inclusion in the definition of 'taxable supply' as provided in S.2(41) of the Sales Tax Act, 1990 and that again supply of zero-rated goods had categorically been declared by the legislature as 'taxable supply' in S.2(48) of the Sales Tax Act, 1990---Applicability of notifications was not restricted only to supply of imported goods rather these notifications were applicable to import transactions and as well as, to supply transactions (whether in relation to imported goods or otherwise to goods procured or manufactured locally) in relation to the qualifying goods---Authorities below erred in denying input tax claimed in relation to such goods as these were properly chargeable to sales tax at zero per cent---No conflict existed in the two provisions (i.e. S.4 and S.13 of the Sales Tax Act, 1990) nor there was any conflict between the Sixth Schedule and the subject notifications and the claim of the registered person was fully in accordance with the law---Orders of the authorities below were vacated and appeal was accepted by the Appellate Tribunal.

2001 SCMR 1806; 2003 SCMR 370; PLD 2011 SC 619 and PLD 2007 SC 517 ref.

PLD 1977 Lah. 1327; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917; 2006 PTD 2821; 2010 PTD 1717; 2002 PTD 877 and 1993 SCMR 274 = 1993 PTD 69 rel.

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

----Ss.4 & 13---Zero rating---Exemption---Neither S.4 of the Sales Tax Act, 1990 puts a bar on inclusion of goods covered by S.13 of the Sales Tax Act, 1990 nor S.13 of the Sales Tax Act, 1990 override S.4 of the Sales Tax Act, 1990 which showed that there was no conflict between the two provisions---Such were two independent provisions dealing with independent schemes, there was no question of conflict.

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

----Ss.4 & 13---Zero rating---Exemption---Determination of fact that whether there was any conflict of provisions or not it was to be ascertained as to whether the notifications exceeded or reduced the mandate provided in S.4 of the Sales Tax Act, 1990, the enabling provisions.

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

----Ss.4 & 13---Zero rating---Exemption---No omission could be attributed to the legislature and such principle, if followed, led to the irrefutable conclusion that the cross reference was purposefully not made by the legislature both in S.4 and S.13 of the Sales Tax Act, 1990 so as to allow zero rating the qualifying goods which even otherwise were exempt from sales tax under S.13 of the Sales Tax Act, 1990.

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

----S.45B---Appeal---Treating a notification ineffective or ultra vires by the First Appellate Authority---Validity---Authorities below did not possess the power of treating a notification ineffective or ultra vires---By doing so, First Appellate Authority had transgressed their jurisdiction which could not be endorsed under any circumstances---Treating the notifications ineffective tantamount to declaring the same ultra vires indirectly---What an authority cannot do directly it cannot be done indirectly---Officers of the revenue were not mandated with the power of not following the notification by doing this they had not acted in accordance with law and there action could not be approved.

2002 PTD 632; 2005 PTD 2139 and 2003 PTD 1276 rel.

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

----S.72---Officers of Inland Revenue to follow Federal Board's orders, etc---Ruling of the Federal Board of Revenue not only spelled out proper scheme of law but also carried a binding force on the authorities below under S.72 of the Sales Tax Act, 1990 and passing the order in disregard to the same was unlawful.

2007 PTD 921 rel.

Asim Zulfiqar Sheikh, FCA for Appellant.

Muhammad Tahir, D.R. for Respondent.

Date of hearing: 19th October, 2012.

2013 P T D (Trib.) 444

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

Messrs H.G.R., TRADERS, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, FAISALABAD

M.A. (Stay) No.886/LB and S.T.A. No.951/LB of 2012, decided on 3rd October, 2012.

Sales Tax Act (VII of 1990)---

----Ss.21 & 2(14)---De-registration, blacklisting and suspension of registration-Sales tax registration was suspended on the ground that registered person had adjusted input tax against the purchase/sales of blacklisted/suspended/de-registered/non-functional units; and supply of goods had not been taken place as envisaged under S.2(14) of the Sales Tax Act, 1990---Taxpayer contended that adverse order had been issued without any show-cause notice and without hearing the contention of taxpayer, moreover it was non-specific; and all terminologies had been used which gave the impression that department was itself not sure about the exact allegation---Validity---Order was passed without issuance of show-cause notice and without hearing the taxpayer---Issuance of such adverse orders detrimental to the interest of any taxpayer were void in the eyes of law---Order was set aside and appeal was accepted by the Appellate Tribunal with the observation that department was at liberty to initiate proceedings against the taxpayer in the manner and direction given by the High Court in Writ Petition No.6990 of 2012 in the case of JM Corporation v. Federation of Pakistan.

Messrs JM Corporation v. Federation of Pakistan Writ Petition No.6990 of 2012 rel.

Khubaib Ahmad for Applicant.

Nadeem Arif, D.R. for Respondent.

Date of hearing: 3rd October, 2012.

2013 P T D (Trib.) 452

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javaid Masood Tahir Bhatti, Chairman and M.B. Tahir, Accountant Member

Messrs RAMZAN STEEL INDUSTRIES, Proprietor Khalid Mahmood, Gujranwala

Versus

COMMISSIONER INLAND REVENUE (APPEALS), R.T.O., GUJRANWALA

I.T.As. Nos.1103 and 1105 of 2012, decided on 11th October, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 205, 153(7)(h)(i), 153(1)(a) & 117---Failure to pay tax collected or deducted---Status of taxpayer---Individual or Association of Persons---Annual turnover of the taxpayer exceeded 50 million Rupees---Taxpayer having turnover of Fifty Million rupees or above in tax year 2007 and onward fell in the definition of "Prescribed Person"---Taxpayer being a withholding agent was obliged to deduct income tax and deposit into government exchequer as required under S.153(1)(a) of the Income Tax Ordinance, 2001 which it did not do---Taxation authority required the taxpayer to provide party-wise details and evidence of tax deduction on raw material purchased locally during the tax year 2010, but no compliance was made---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 orders passed under Ss.161/205 of the Income Tax Ordinance, 2001 were illegal as the status of the taxpayer during the years under consideration, was that of individual and not of Association of Persons as return for tax year 2009, available on record had been filed in the status of individual and the returns of tax years 2009 & 2010 were signed as sole proprietor and was shown as owner of 100% shares of capital investment in the returns and provisions of S.153(7)(h) of the Income Tax Ordinance, 2001 did not apply for tax years 2009 as well as tax year 2010 and that status in returns for tax years 2009 and 2010 as Association of Persons was indicted 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 taxpayer could not be blamed; that copies of returns filed manually for tax years 2009 & 2010 being evidence showing status of individual; and that copies of returns placed on record which were e-filed had status of individual, dissolution deed, affidavits of taxpayer as well as of his disassociating partners---Revenue contended that if the Association of Persons was dissolved then the 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 under S.153(7)(h) of the Income Tax Ordinance, 2001---Validity---Main dispute between the taxpayer and revenue was the determination of status of taxpayer either of individual or Association of Persons---Returns filed were of individual and not an Association of Persons---National Tax Number shown in the orders of assessing authorities were different than the National Tax Number of returns filed manually as well as e-filed---Taxpayer used the status of Association of Persons for e-filing of returns 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 that 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---Section 153(7)(i) of the Income Tax Ordinance, 2001 was inserted through Finance Act, 2010, which was applicable to individual relevant for the tax year 2011---Authorities below had not applied their judicious mind rather they proceeded to pass orders under Ss.161/205 of the Income Tax Ordinance, 2001, in arbitrary, whimsical and technical manner and completely brushed aside the solid material/evidence provided by the taxpayer for determining his status---Taxpayer was declared as 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 orders passed under Ss.161/205 of the Income Tax Ordinance, 2001 were annulled by the Appellate Tribunal.

Shoaib Ahmed Sh. for Appellant.

Farrukh Majeed, D.R. for Respondent.

Date of hearing: 11th October, 2012.

2013 P T D (Trib.) 459

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

C.I.R., ZONE-1, R.T.O., GUJRANWALA

Versus

Messrs T.K. STEEL MILLS, SIE-II, GUJRANWALA

I.T.A. No.1876/LB of 2012, decided on 19th December, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 205,153(7)(h)(i) & 153(1)(a)---Failure to pay tax collected or deducted---Status of taxpayer---Taxpayer was an Association of Persons whose annual turnover exceeded 50 million Rupees---Association of Persons having turnover of fifty million Rupees or above in tax year 2007 and onwards fell in the definition of "Prescribed Person"---Taxpayer being a withholding agent was obliged to deduct income tax and deposit into government exchequer which it had failed to do---Assessing authority issued different letters requiring the taxpayer to provide party-wise details and evidence of tax deduction on raw material purchased locally during the tax year 2009---Taxpayer contended that business for the year under consideration was conducted in individual capacity as such provisions of S.153(7) of the Income Tax Ordinance, 2001 did not attract and submitted certain documents as evidence---Taxpayer was treated as taxpayer in default for non-deduction of tax---Order under Ss.161/205 of the Income Tax Ordinance, 2001 was annulled by the First Appellate Authority---Revenue contended that order was bad in law and contrary to the facts of the case; that First Appellate Authority was not justified in holding that status of the taxpayer was an individual on the basis of return filed by member of Association of Persons after the completion/finalization of the tax proceedings under Ss.161/205 of the Income Tax Ordinance, 2001, ignoring the return already filed by the Association of Persons itself on e-portal of Federal Board of Revenue---Validity---Since taxpayer had filed a dissolution deed of Association of Persons and since return for tax year 2009 was filed in the status of individual therefore return filed in the status of Association of Persons for the tax year 2009, was revised to a return of an individual---Taxpayer being an individual was not obliged to deduct tax under S.153(7)(h) or (i) of the Income Tax Ordinance, 2001---Order was not sustainable in the eyes of law---Besides, since clause (i) of S.153(7) of the Income Tax Ordinance, 2001 was inserted through Finance Act 2010, same would be applicable in tax year 2011---Assessing authority had ignored the facts and completed assessment which suffered from infirmities and defects---Observation made by the First Appellate Authority was justified in annulling the assessment and there was no illegality or perversity in the order to call for any interference---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeal filed by the Revenue was dismissed being devoid of any merits.

2012 PTD (Trib.) 1732 rel.

Mrs. Ayesha Imran Butt, D.R. for Appellant.

Shoaib Ahmad Sheikh for Respondent.

Date of hearing: 19th December, 2012.

2013 P T D (Trib.) 466

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

Messrs MAGNA TEXTILE INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

C.I.R. (APPEALS), R.T.O., FAISALABAD

S.T.A. No.297/LB of 2012, decided on 6th August, 2012.

Sales Tax Act (VII of 1990)---

----Ss.10, 8(1)(a), 7, 4, 2(14), 23, 26, 33 & 34---Refund Rules, 2006, R.33---Refund of input tax---Consumption of goods requirement of---Scope---Refund was sanctioned on purchases/consumption of goods for the period ended on 30-11-2010, which was cleared on import on 1-12-2010---Recovery proceedings of such refunded amount were initiated on the ground that taxpayer consumed quantity of goods in November, 2010 while the same was cleared in December, 2010 as evident from goods declaration and that Assessing Officer left unattended the codal requirement; and refund was sanctioned without verifying the consumption of goods and such lapse resulted into inadmissible refund---Taxpayer contended that Ss. 7 and 10 of the Sales Tax Act, 1990 allowed adjustment of input tax/payment of refund just after satisfying that payment of input tax had been paid; that there was no bar and no restriction of utilization/consumption of the goods prior to availing input tax adjustment/refund; that Revenue authorities were misinterpreting R.33 of the Sales Tax Rules, 2006 in order to put a restriction that goods were actually consumed in manufacture of goods which were to be exported or supplied at rate of zero percent; that even otherwise said rules were subservient to Sales Tax Act, 1990 and in case of conflict between said rules and any provision of said act, the later would prevail---Revenue authority contended that it had clearly been mentioned in S.10 of the Sales Tax Act, 1990 that it might impose conditions/restriction for regulating refund mechanism---Validity---Both Ss.7 and 10 of the Sales Tax Act, 1990 allowed input tax adjustment/refund simply on payment of input tax---No condition existed for consumption of the goods before taking input tax adjustment or availing refund---Rule 33 of the Sales Tax Rules, 2006 had to be read/interpreted in harmony with the provision of Ss.7 and 10 of the Sales Tax Act, 1990---Appeal was accepted in circumstances.

2004 SCMR 456 = 2004 PTD 1179; GST 2003 CL 598 and 2012 PTD (Trib.) 453 ref.

CIR Zone-III, RTO, Faisalabad v. Messrs Kamal Fabrics, Faisalabad S.T.A. No.543/LB of 2011 rel.

Khubaib Ahmad for Appellant.

Mrs. Fiza Batool, DR for Respondent.

Date of hearing: 26th July, 2012.

2013 P T D (Trib.) 477

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

Messrs NASEEM PLASTIC HOUSE, FAISALABAD

Versus

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

S.T.A. No.960/LB and M.A. (Stay) No.1097/LB of 2012, decided on 11th December, 2012.

Sales Tax Act (VII of 1990)---

----Ss.21(2)(3), 2(37), 2(14)(a), 3(3)(a), 7, 8(1)(ca), 11, 23, & 73---Sales Tax General Order No.35/2012 dated 30-6-2012, Cls.37 & 38---Deregistration, blacklisting and suspension of registration---Registration of the taxpayer was declared to be suspended from the date of its registration by the First Appellate Authority---Taxpayer contended that First Appellate Authority without adverting to the questions involved had passed the order by suspending the registration which was not at all speaking order and could not be called a "judicial order"; that while passing an adverse order of suspension of registration or ultimate blacklisting by the quasi-judicial forum it was supposed to intimate about the nature of allegation and its detailed information, as the same was not disclosed, it rendered the whole exercise illegal and without jurisdiction; that whole exercise had been carried out by the First Appellate Authority merely on its "considered opinion" without establishing the incidence of tax fraud and issuance of fake and flying invoices; and that no provision existed empowering the revenue authorities to suspend the registration of a registered person from the date of its registration on certain default of its suppliers for subsequent periods---Validity---Order suspending the registration had been passed without considering the facts that it may cause a huge damage to the taxpayer as well as the Federal exchequer---Order had been passed under S.21(2) of the Sales Tax Act, 1990 which laid down that Federal Board of Revenue could make procedure for blacklisting or suspension of registration only by a "notification in the official Gazette" which showed that the object of passing an adverse order of suspension of registration or ultimate blacklisting by the quasi-judicial forum was to intimate the concerned party about nature of allegation and its detailed information which had not been disclosed to the taxpayer---Whole exercise in this respect was without any jurisdiction---Order passed under S.21 of the Sales Tax Act, 1990 was annulled by the Appellate Tribunal and it was directed that the registration be restored and imported goods be released, and department may proceed in accordance with the law after issuing notice to the party if sufficient evidence was available with the department that registered person was involved in tax fraud and had adjusted input and output on fake invoices.

PLD 1992 SC 485; 2007 PTD 430; Aftab Shahban Mirani v. President of Pakistan and others 1998 SCMR 1863; 2012 PTD (Trib.) 337; 2012 PTD (Trib.) 453; PTCL 2005 CL 38(sic); University of Dacca v. Zakair Ahmed PLD 1965 SC 90; New Jubilee Insurance Company Ltd., Karachi v. National Bank of Pakistan Karachi PLD 1999 SC 1126, Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681; Zulfiqar Ali v. Division Superintendent (Workshop) Pakistan Railways, Moghalpura, Lahore PLD 2001 Lah. 13 Collector, Collectorate of Customs (Exports), Karachi v. Abdullah Garments (Pvt.) Ltd., Karachi 2012 PTD (Trib.) 1542 rel.

Khubaib Ahmed for Applicant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 11th December, 2012.

2013 P T D (Trib.) 521

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

Messrs SHEZAN INTERNATIONAL LIMITED, LAHORE

Versus

C.I.R., ZONE-I, LTU, LAHORE

I.T.A. No.1165/LB of 2011, decided on 4th December, 2012.

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

----Ss.37, 97, 97A, 75 & 122(5A)---Capital gain---Merger of companies under the scheme of arrangement duly approved by the High Court---Disposal of assets---Addition made on account of capital gain---Taxpayer contended that merger of wholly owned subsidiary duly approved by the High Court was fully covered under the provisions of S.97 of the Income Tax Ordinance, 2001, resultantly no gain or loss shall be taken to have arisen on disposal of its assets; that First Appellate Authority erred in confirming the action of Assessing Officer not to accept the claim that provisions of S.97A of the Income Tax Ordinance, 2001 squarely applied, whereby, no gain or loss shall be taken to have arisen on disposal of assets under the scheme of arrangement and reconstruction duly approved by the High Court and that First Appellate Authority erred in confirming the action of Assessing Officer, wherein, it had been held that the merger of wholly owned subsidiary under the scheme of arrangement duly approved by the High Court fell under the ambit of disposal of shares in terms of S.75 of the Income Tax Ordinance, 2001---Validity---Merger of two or more companies was essentially a process of corporate reconstruction whereby assets of merging companies were either clubbed or brought together in the surviving or new company, however, proprietary rights of assets remained intact---No financial transaction could be said to have taken place between the merging companies---In the scheme of merger arrangement there did not take place any sale, disposition, exchange or relinquishment or extinguishment of any right on the part of amalgamating companies that gave rise to any income or gain resulting a taxable event---Taxpayer had fulfilled all the conditions laid down in S.97 of the Income Tax Ordinance, 2001---Addition made under S.37 of the Income Tax Ordinance, 2001 and confirmed by the First Appellate Authority was illegal and void ab initio and the same was deleted by the Appellate Tribunal.

Messrs Ghani Float Glass Ltd. v. CCIR(Appeals-I), RTO, Lahore MA (Cond) No.81/LB of 2010 and ITA No.880/LB of 2010 dated 11-2-2011 and Mashreq Bank, PSC, Karachi v. Commissioner of Inland Revenue (legal Devision), RTO, Karachi 2012 PTD 1544 rel.

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

----S.122 (5A)---Amendment of assessment---Delegation of power---Jurisdiction---Commissioner having delegated his power under S.122(5A) of the Income Tax Ordinance, 2001 to Additional Commissioner, he was competent to issue notice to the taxpayer.

Writ Petition No.653 of 2009 dated 16-7-2009 (Trib.) rel.

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

----S.21(k)---Deductions not allowed---Addition on account of repair and maintenance paid in respect of vehicles provided to executive employees---Taxpayer contended that company had provided vehicles to its few executive staff members for official duties besides allowing them personal use thereof to some extent as per terms of employment; that allocation of such vehicles was a part of remuneration of employees against their services; that vehicles were owned by the company and used for the purposes of business, the claim of amount of repair and maintenance on these vehicles was business expense of the company; that personal use of vehicles by the employees was in accordance with the terms of employment contract and its value could be treated only as perquisite/benefit to employees, chargeable to tax under the head salary; that company was also taxed on account of excess perquisites; that while calculating amount of excess perquisites department had also made addition of the value of conveyance provided to different executive staff members while computing the excess perquisites; and that disallowance of expense on account of repair and maintenance on such vehicles was against the law---Validity---Submission made by the taxpayer was without any substance---Taxpayer had not provided any detail of expenses incurred on repair and maintenance of vehicles provided to the employees and Directors---Addition was made on account of running and maintenance of vehicles provided to the Directors---Appellate Tribunal maintained the treatment meted out by the authorities below and addition made were maintained.

Muhammad Awais, FCA for Appellant.

M. Tahir, DR for Respondent.

Date of hearing: 18th October, 2012.

2013 P T D (Trib.) 530

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

Messrs FAISALABAD ELECTRIC SUPPLY COMPANY LIMITED, FAISALABAD

Versus

C.I.R. (APPEALS), FAISALABAD and another

S.T.A. No.628/LB of 2012, decided on 25th September, 2012.

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

----S. 36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice was issued on the basis of some invoices allegedly issued by non-filer, suspended and blacklisted supplier companies---Taxpayer contended that department was not sure about the status of invoice in question as the word 'believed' was used instead of conformity of any prima facie evidence to show any collusion or deliberate act of evasion; that notice under S.36(1) of the Sales Tax Act, 1990 was ab initio without jurisdiction; that notice in question could, at the most, be construed to have been issued under S.36(2) of the Sales Tax Act, 1990 and the limitation applicable would be three years; that as period involved in show-cause notice was of twelve months, out of which five months shall become time barred ; that most of the invoices issued within limitation period could not be subject to sales tax; that sales tax could be charged only on supply of goods, but the registered person being a public limited company was involved in some other transactions also, which were not taxable under Sales Tax Act, 1990; and that even the invoices which were taxable under Sales Tax Act, 1990, were genuinely issued and registered person had documents to prove its veracity---Validity---Department could not point out from the show-cause notice that the registered person was confronted on any act of collusion or deliberate evasion or misuse of the alleged invoices knowingly---However, Assessing Officer submitted that use of invoices of a blacklisted company itself was proof of a deliberate act of using any inadmissible invoices---Language of show-cause notice confirmed that collusion or deliberate act of tax evasion was never confronted---Show-cause notice could at the most be taken to have been issued under subsection (2) of S.36 of the Sales Tax Act, 1990---Both the orders by forums below were vacated and case was remanded to Taxation Officer having jurisdiction of the case and directed to treat the show-cause notice as issued under S.36(2) of the Sales Tax Act, 1990 and proceed de novo keeping in view the limitation provided therein---Taxation Officer shall also decide the objection about the chargeability of sales tax on certain invoices and pass a speaking order after considering all legal objections.

2005 PTD 480; PLD 1989 (LHC) 47; (2008) 97 Tax 29; 2011 PTD (Trib.) 808 and 2008 SCMR 615 ref.

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

----S.36(1)(2)---Recovery of tax not levied or short-levied or erroneously refunded---Interpretation of subsections (1) & (2) of S.36 of the Sales Tax Act, 1990---Limitation---Subsection (1) of S.36 of the Sales Tax Act, 1990, if compared with subsection (2) of S.36 of the Sales Tax Act, 1990, showed that legislature had addressed two different situations in both the subsections; one where the registered person makes any evasion deliberately and in collusion with any fraudulent element and the second where the tax was not paid due to any inadvertence---For this reason, under subsection (1) of S.36 of the Sales Tax Act, 1990 the limitation is five years whereas under subsection (2) of S.36 of the Sales Tax Act, 1990 the limitation is three years.

Mian Ashiq Hussain and Ghulam Rasool, ACA for Appellants (in S.T.A. No.628/LB of 2012).

Farrukh Majeed, DR and Javed Badar, Aca for Respondents (in S.T.A. No.628/LB of 2012).

Farrukh Majeed, DR and Javed Badar, Aca for Appellants (S.T.A. No.822/LB of 2012).

Mian Ashiq Hussain and Ghulam Rasool, ACA for Respondents (S.T.A. No.822/LB of 2012).

Date of hearing: 25th September, 2012.

2013 P T D (Trib.) 537

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

Messrs ZAMINDARA PAPER MILLS (PVT.) LTD., LAHORE

Versus

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

S.T.As. Nos.685/LB and 686/LB of 2012, decided on 21st December, 2012.

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Date of dispatch---Date of order---Taxpayer contended that order passed by the Deputy Commissioner Inland Revenue was hit by limitation and was barred by time as the show-cause notice was issued on 20-4-2011 and the order in original was passed on 10-1-2012 which was the date of dispatch of the order; and although the Deputy Commissioner ante dated the order while signing the same which was evident from the date of dispatch that the order was passed on 10-1-2012---Validity---Contention of the taxpayer was that the order-in-original was passed beyond the prescribed limitation of 120 days as it was dispatched and received after more than 220 days from the issuance of show-cause notice---Revenue controverted said plea and pointed out that the order in original was passed on 6-8-2011---Fact was not understandable that as to why an order passed on 6-8-2011 was delivered to the registered person on 10-1-2012---Contention of taxpayer that order-in-original was passed after the statutory limit appeared was correct---Order-in-original, therefore, had been passed after the statutory limit provided by law; and was illegal, void ab initio and of no legal effect---Orders of the authorities were annulled by the Appellate Tribunal and appeal of the registered person was accepted.

Dondot Cement Company Ltd., Lahore v. Secretary, Revenue Division Islamabad 2008 PTD 609 and Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd., v. Collector of Sales Tax Gujranwala and another 2008 PTD 60 rel.

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

----S.7---S.R.O. No.555(I)/96 dated 1-7-1996---Determination of tax liability---Pecuniary jurisdiction---Taxpayer contended that order had been passed by the Deputy Commissioner who did not have the pecuniary jurisdiction to issue the show-cause notice and pass the order---Validity---Deputy Commissioner Inland Revenue who issued the show-cause notice and passed the assessment order, could not assume the jurisdiction to issue the show-cause notice and pass the assessment order under the law---Said order was without lawful authority and void ab initio.

Messrs Ibrahim Steel Casting v. The Commissioner Inland Revenue (Appeals), Lahore STA No.55/LB of 2012; Messrs EN EM Enterprises v. Additional Collector of Sales Tax and Central Excise (Adjudication), Lahore ST No.46/LB of 2009; STA No.531/LB of 2011 and STA No.578/LB of 2011 rel.

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

----Ss.2(37), 21, 23, 33 & 73---Sales Tax General Order No.1 of 2004, Para 3(N)---Sales Tax Rules, 2006---Tax fraud---Show-cause notice was issued for recovery of tax along with default surcharge and penalty on the ground that taxpayer had claimed input tax adjustments on the basis of invoices issued by the blacklisted suppliers and fake invoices---Taxpayer contended that he could not be penalized due to black listing of its suppliers subsequent to the transaction made with him; that black listing of the suppliers had been done through administrative orders and it could not have effect on the input adjustment retrospectively; that to invoke provision of S.2(37) of the Sales Tax Act, 1990 pre-requisite was to allege that the registered person had committed tax fraud and had acted knowingly, dishonestly, fraudulently and without any lawful excuse; that raw material was purchased from registered person under the provisions of S.23 of the Sales Tax Act, 1990, and status of those suppliers was also checked and verified from the website of Federal Board of Revenue and it was reported by it to be active; that all the payments were made after adhering to the provisions of S.73 of the Sales Tax Act, 1990; that suppliers had also submitted copied of their monthly sales tax returns and the summaries "of the relevant period" to the Department; and did all the possible precautions and endeavors as well as used all the official sources to verify status and genuineness of the suppliers, and discharged all his legal and ethical responsibilities to bring the truth at the door in good faith; that suppliers of the transactions were neither blacklisted at the time of supply nor included in the list of suspected registered persons, and claimed its input tax adjustment in accordance with the provisions of Ss.3, 7 & 73 of the Sales Tax Act, 1990; that forums below had failed to interpret these provisions of law read with S.21 of the Sales Tax Act, 1990 while holding the input tax adjustment as inadmissible; that all the requisite conditions as were laid down in S.7 and S.73 of the Sales Tax Act, 1990 for clearing input tax and payment of tax to the suppliers 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; 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 the Government Ex-chequer or not; and that as the department had failed to fulfill its official obligations rather shifted its responsibilities on the Registered Person shoulders which was highly unwarranted and uncalled for---Validity---No evidence whatsoever was available wherefrom it could be deduced that the taxpayer had knowingly or dishonestly or fraudulently committed tax fraud by claiming input tax adjustment against the sales tax invoices issued by the suppliers---Even the audit contravention report could not establish with any concrete reasoning that the taxpayer was involved in inadmissible input tax adjustment---Department had failed to discharge their initial burden of proof which lay on them to establish the grounds on which the suppliers were blacklisted and there was any issue related to the taxpayer involved during the blacklisting proceedings against the suppliers of the taxpayer---Record had proved that there was ample justification with the taxpayer to claim adjustment of input tax, as the suppliers were registered person and their status was active as per Federal Board of Revenue Website; they were regularly submitting their returns and summary---All the payments were made in accordance with the provisions of S.73 of the Sales Tax Act, 1990---Department failed to produce any order regarding the blacklisting of suppliers issuing invoices to the taxpayer, whereas the persons registered under Sales Tax Act, 1990 could only be declared as blacklisted through an order passed under Cl.(N) of Para 3 of Sales Tax General Order No.1 of 2004 read with R.12 of Chapter 1 of Sales Tax Rules, 2006 and S.21 of the Sales Tax Act, 1990---No order was available to show that the suppliers were blacklisted yet that order through which the suppliers were alleged to be blacklisted should have been an executive order---Revenue failed to prove the allegation levelled against the taxpayer that they claimed inadmissible input tax adjustment on the basis of invoices issued by their suppliers which were blacklisted subsequent to the transactions made by the taxpayer---Orders were set aside and the orders-in-original were annulled by the Appellate Tribunal and appeals were accepted.

Messrs Taj International (Pvt.) Ltd., Lahore v. The CIR (Legal Division), RTO, Lahore S.T.A. No.478/LB of 2012 and S.T.A. No.226 of 2011 dated 26-7-2011 ref.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and Messrs Brother Engineering (Pvt.) Ltd.'s case 2004 PTD 2928 rel.

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

----S.2(37)---Tax fraud---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.

(e) Interpretation of statutes---

----Retrospectivity---Scope---Orders or notifications which confer rights and are beneficial would be given retrospective effect and those which adversely affected or invaded upon the vested right could not be applied with retrospective effect.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and Messrs Brother Engineering (Pvt.) Ltd. 2004 PTD 2928 rel.

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

----S.21---Deregistration, blacklisting and suspension of registration---Subsequent blacklisting of supplier could not be a tool to deprive the registered person of a valuable right accrued in his favour for purchases or transactions made prior to the suspension of registration of such supplier.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and Messrs Brother Engineering (Pvt.) Ltd. 2004 PTD 2928 rel.

Saood Nasrullah Cheema for Appellant.

Mrs. Ayesha Imran Butt, D.R. for Respondent.

Date of hearing: 21st December, 2012.

2013 P T D (Trib.) 547

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

SHAHID ANSARI, Proprietor, United Agencies, Lahore

Versus

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

I.T.A. No.38/LB of 2012, decided on 18th December, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(4)(b), 122(5A), 122(9), 122(3)(b), 177, 114(6) & 120---Amendment of assessment---Limitation---Return for tax year 2008 was revised on 16-2-2009, when original return had attained the status of order under S.120 of the Income Tax Ordinance, 2001 on 30th September, 2008---Notice under S.122(5A) of the Income Tax Ordinance, 2001 was issued on 29-6-2009 and order was passed on 30-9-2010---Taxpayer contended that order under S.122(5A) of the Income Tax Ordinance, 2001 dated 30-9-2010 was time barred under S.122(4)(b) of the Income Tax Ordinance, 2001; and pointed out that in clause (b) of subsection (4) of S.122 of the Income Tax Ordinance, 2001 words 'amended assessment' were used for which limitation was one year whereas in clause (a) of subsection (4) of S.122 of the Income Tax Ordinance, 2001 words 'original assessment' were used for which limitation was 5 years---Revenue claimed that limitation in amended assessments cases was one year in addition to 5 years---Taxpayer explained that case cited by the Revenue related to merger of assessment and original assessment under S.120 of the Income Tax Ordinance, 2001 and not amended assessment---Validity---Limitation in the present case was one year and amended assessment under S.122(5A) of the Income Tax Ordinance, 2001 dated 30-9-2010 was cancelled by the Appellate Tribunal by holding same to be hit by limitation---Orders passed by the authorities were against the doctrine of natural justice and were not sustainable in the eye of law---Order passed by the Additional Commissioner dated 30-9-2010 was illegal, void ab-initio which was passed after the stipulated period and confirmation thereof by the Commissioner was vacated/cancelled---Appeal was accepted by the Appellate Tribunal.

Messrs Rafi Electronics Corporation (Pvt.) Ltd., Lahore v. CIT., R.T.O., Lahore 2011 PTD (Trib.) 936 distinguished.

Messrs Eli Lilly Pakistan (Pvt.) Ltd., 2009 PTD 1392 rel.

Collector Sahiwal and 2 others v. Muhammad Akhtar's case 1971 SCMR 681; Director, Directorate General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; PLD 1958 SC 104; 2007 SCMR 818; 2003 YLR 1555; (1996) 73 Tax 95 (Trib.); 1992 PTD (Trib.) 1610; 2005 PTD (Trib.) 344; 2003 PTD (Trib.) 279; 2008 PTD (Trib.) 1491 and I.T.A. No.697/LB of 2010 rel.

Inayat Ali Chaudhry for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 14th December, 2012.

2013 P T D (Trib.) 566

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

Messrs ISHTIAQ STEEL INDUSTRY, LAHORE

Versus

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

S.T.A. No.1171/LB of 2012, decided on 14th December, 2012.

Federal Excise Act (??? of 2005)---

----Ss. 8, 19(1), 19(3)(c) & 3A---Sales Tax Act (VII of 1990), 22 & 73---Constitution of Pakistan, Art. 25---Special Procedure Rules, 2007---S.R.O. 648(I)/2011 dated 25-6-2011---S.R.O. 655(I)/2007 dated 29-6-2007---Default surcharge---Offences, penalties, fines and allied matters---Amnesty---Required sales tax record maintained under S.22 of the Sales Tax Act, 1990 was submitted---Detection report was issued by alleging that taxpayer had charged and collected Special Excise Duty on their supplies but failed to deposit the same in national exchequer---On the basis of detection report, show cause notice was issued for payment of Special Excise Duty along with default surcharge without mentioning any penalty---Taxpayer contended that in other cases default surcharge had only been charged after adjustment of special excise duty paid on import and local purchases and no penalty was charged; that according to Art. 25 of the Constitution, all citizens are equal; that orders passed on the basis of grounds not mentioned in the show cause notice were ab initio illegal and void and no demand could be raised on the basis of illegal notice; that Revenue had admitted that all documents regarding adjustment of input of Special Excise Duty were provided i.e. purchase register, purchase invoice, bill of entries and payment proof under S.73 of the Sales Tax Act, 1990 and paid the balance amount by availing amnesty scheme; and that if the taxpayer had deposited the principle amount of Special Excise Duty collected at the relevant time and claimed benefits of amnesty, there was no tax fraud on the part of taxpayer---Validity---No fraud was alleged or confronted by the department in the show cause notice or in subsequent proceedings---Even otherwise Government had exempted whole of the amount of default surcharge and penalties payable---Assessing Officer himself admitted that registered person had provided all the documents regarding adjustment of input of Special Excise Duty i.e. purchase register, purchase invoice, bill of entries and proof of payment under S.73 of the Sales Tax Act, 1990 and paid balance amount by availing amnesty scheme---By allowing credit of tax paid under amnesty scheme, the Assessing Officer himself admitted the availability of amnesty scheme to the taxpayer---Levy of default surcharge under S.8, penalty under S.19(1) and fine under S.19(3)(c) of the Federal Excise Act, 2005 were not attracted in circumstances---Order of Assessing Officer was cancelled by the Appellate Tribunal being not maintainable in the eye of law and order of First Appellate Authority was vacated.

2010 PTD 1631; GST 2004 CL 546; 1987 SCMR 1844 and 2001 SCMR 838 ref.

GST 2004 CL 280; (1959) 37 ITR 288; PLD 1997 Kar. 370 and 1994 PTD 927 rel.

Zaheer-ud-Din Babar for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 14th December, 2012.

2013 P T D (Trib.) 572

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

GULZAR AHMED

Versus

DEPUTY DIRECTOR, INTELLIGENCE AND INVESTIGATION (CUSTOMS, SALES TAX AND FEDERAL EXCISE), GUJRANWALA and 2 others

S.T.A. No.2217/LB and C.E.A. No.47/LB of 2009, decided on 20th December, 2012.

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

----Ss. 3 & 3B---Sales Tax Act, (VII of 1990), Ss.3(1), 6, 14, 22, 23, 26, 34 & 36---Customs Act (IV of 1969), Ss.157 & 168---Central Excise Rules, 1944, Rr.7, 9, 49, 51, 52-A, 52-C, 210 & 226---Duties specified in the First Schedule to be levied---Goods partially comprising of dutiable articles---Truck along with cigarettes was brought to Intelligence Office which was seized for violation of provisions of Central Excise Act, 1944, Sales Tax Act, 1990 and Customs Act, 1969---Show cause notice was issued under S.36(1) of the Sales Tax Act, 1990 on the allegation that cigarettes were produced and cleared without payment of leviable duty and taxes and were liable to confiscation---Said show cause notice was replied to, however cigarettes were confiscated and penalty equal to five times of duty/taxes involved was imposed in terms of R.210 of Central Excise Rule, 1944---Taxpayer contended that it was alleged in the show cause notice that "seized cigarettes had been produced and cleared without payment of leviable duty and taxes and were liable to confiscation" whereas while passing order-in-original, cigarettes were confiscated on the ground that "the seized cigarettes were fake one and manufactured without having a central excise license as required under S.6 of the Central Excise Act, 1944" and thereafter confiscated cigarettes were auctioned and penalty was imposed which was not incorporated in show cause notice and as such order-in-original as well as subsequent orders were illegal---Validity---No charge/allegation of counterfeit or fake cigarettes was incorporated in the show cause notice whereas while passing original order adjudicating officer confiscated the cigarettes and imposed penalty on the charges which were not confronted through the show cause notice---According to S.34 of the Central Excise Act, 1944, the adjudicating officer was under legal obligation to give option to pay fine in lieu of confiscation in addition to leviable duty and taxes whereas cigarettes were confiscated outrightly and subsequently auctioned---Goods could only be confiscated outrightly and penalty imposed if the same were found counterfeit / fake in terms of R.210(1) of the Central Excise Rules, 1944---Proviso to such Rule imposed another condition that the machinery used for manufacturing of counterfeit goods or in manufacturing of cigarettes on which duty of excise had been evaded was also liable to seizure and confiscation---Neither it was established through evidence that counterfeit/fake cigarettes were manufactured by such and such unit nor any machinery were seized by the department---Confiscation order, auction of cigarettes and imposition of penalty were in violation of mandatory provisions of law and the dictum laid down by the Supreme Court of Pakistan---Order-in-original was passed after the prescribed time limit as provided under S. 36(3) of the Sales Tax Act, 1990---Both the order below were set aside by the Appellate Tribunal.

Collector of Central Excise and Land Customs and others v. Rahm Din 1987 SCMR 1840; Messrs Hanif Straw Board Factory v. Additional Collector (Adjudication), Customs Central Excise and Sales Tax, Gujranwala and 2 others 2008 PTD 578; Messrs Miraj Din v. Collector of Customs, Excise and Sales Tax (Appeals), Lahore and 2 others 2009 PTD 2004; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762 and 2010 PTD (Trib.) 2259 rel.

(b) Central Excise Rules, 1944---

----R.210---Penalty---Only counterfeit / fake goods could be confiscated outrightly along with the machinery used in manufacturing thereof.

(c) Central Excise Rules, 1944---

----R.210---Penalty---No allegation of counterfeit / fake was mentioned in the show cause notice and as such the original order and subsequent appellate order passed on the ground which was not mentioned in such notice was illegal and void---Consequently, confiscation, auction of cigarettes and imposition of penalty under R.210 of the Central Excise Rules, 1944 were also illegal, void and without lawful authority

(d) Central Excise Rules, 1944---

----R.210---Sales Tax Act (VII of 1990), Ss.36(1) & 33---Penalty---Penalty was imposed under R.210 of the Central Excise Rules, 1944 whereas show cause notice was issued under provision of S.36(1) of the Sales Tax Act, 1990 without invoking penal provision of S.33 of the Sales Tax Act, 1990 applicable at the relevant time---Since no penal provision of Sales Tax Act, 1990 was mentioned in show cause notice, the penalty imposed under R.210 of the Central Excise Rules, 1944 without issuing show cause notice under R.10 of the Rules was beyond the jurisdiction of the adjudicating officer---Penalty imposed was without jurisdiction and the same was illegal, void an without lawful authority.

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

----S. 36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Original order was passed after the limitation of 90 days prescribed under S.36(3) of the Sales Tax Act, 1990---Show cause notice was issued on 20-12-2004 whereas the order-in-original was passed on 16-4-2005 after one hundred and seventeen days from the date of issuance of show cause notice---Original order was to be passed on or before 20-3-2005 whereas it had been passed on 16-4-2005 after lapse of 27 days from the limitation prescribed under Proviso to subsection (3) of S.36 of the Sales Tax Act, 1990---Limitation of 90 days was never extended by the Collector and as such admittedly the limitation of 90 days was expired much prior to 16-4-2005.

Messrs Super Asia Muhammad Din and Sons (Pvt.) Ltd. v. The Collector of Sales Tax Gujranwala and another 2008 PTD 60 and Messrs Tanvir Weaving Mills v. Deputy Collector Sales Tax 2009 PTD 762 (H.C. Lah.) rel.

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

----Ss. 11(4) & 36(3)---Assessment of tax---Limitation---Limitation specified in Ss.11(4) and 36(3) of the Sales Tax Act, 1990 is mandatory if any liability is created.

Super Asia Muhammad Din and Sons v. Collector of Sales Tax 2008 PTD 60 rel.

Malik Muhammad Arshad for Appellant.

Mrs. Ayesha Imran Butt, D.R. for Respondent.

Date of hearing: 19th December, 2012.

2013 P T D (Trib.) 591

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Mdmber

Messrs OLYMPIA INDUSTRIES (PVT.) LIMITED, LAHORE

Versus

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

I.T.A. No.1046/LB of 2011, decided on 20th December, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 177 & 122---Audit---Amendment of assessments---First Appellate Authority observed that no appeal was filed against order under S.177 of the Income Tax Ordinance, 2001 and since it was the amendment order under S.122(1) of the Income Tax Ordinance, 2001 regarding which the appeal was filed by the taxpayer, Appellate Authority could only examine whether or not the requirements of the provisions of S.122 of the Income Tax Ordinance, 2001 were fulfilled by the concerned officer---Taxpayer contended that any superstructure raised on illegal foundation would crumble and be set at naught and will be equally illegal as very foundation was not in accordance with law; and that since there was no disagreement that the High Court had already declared the selection to be null and void then on what basis could the amendment order passed in pursuance of such selection be allowed to hold the field, particularly when it had also been noted by the High Court in the said order, that all audit proceedings held there under or in consequence thereof remained of no legal effect---Revenue contended that since order of High Court had already been challenged before Supreme Court, the same did not constitute to be considered as a final decision on the matter of selection and may not be followed---Validity---Decision of any High Court, on point of law, remained binding unless overruled by the Supreme Court---Subject decision having not been overruled by the Supreme Court, the same constituted as binding precedent---No exception could be taken from what had been held by the High Court in the said judgment, especially when no contrary decision had been given by any other High Court of the country---Having said decision operative and valid in the field, there remained no complexity or complication to resolve the controversy involved in the appeal---Reason advanced by the First Appellate Authority for rejecting the appeal was incorrect, improper, unlawful, illegal and without substance and the same could not be approved on any basis whatsoever---Orders of the authorities below were vacated and assessment finalized by the Taxation Officer was without jurisdiction and its confirmation by the First Appellate Authority was null and void---Both the orders were cancelled by the Appellate Tribunal.

2011 PTD 1558; 2010 PTD (Trib.) 1477; 2008 PTD 1440 and I.T.A. No.1386/LB of 2011 rel.

Zulifqar Ali Sh, ITP for Appellant.

Ms. Ayesha Imran Butt for Respondent.

Date of hearing: 20th December, 2012.

2013 P T D (Trib.) 595

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Mdmber

Messrs MAVERICK PETROGAS (PVT.) LIMITED, LAHORE

Versus

A.C.I.R., MAC-01, R.T.O.-II, LAHORE

I.T.A. No.1661/LB of 2011, decided on 17th December, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.162, 205, 148 & Second Sched., Part-II, Cl.(9)---S.R.O. No.575(I)/2006 dated 5-6-2006---FBR letter C.No.1(9)WHT/2006 dated 8-4-2009---FBR letter C.No.1(9)WHT/2006 dated 21-12-2009---FBR letter C.No.1(9)WHT/2006 dated 5-1-2010---Recovery of tax from the person from whom tax was not collected or deducted---Import of CNG Kits and Cylinders---Deduction of tax @ of 1%---Demand was created on the ground that commercial importers were liable to pay 5% advance income tax under S.148 of the Income Tax Ordinance, 2001; and CNG Kits and Cylinders were exempt from sales tax and did not fall under the Sales Tax Zero Rated Regime---Taxpayer contended that goods were cleared by the Federal Board of Revenue through its limb i.e. Customs Authorities who were duty bound to follow the directions and instructions issued by the Federal Board of Revenue; and taxpayer had no excess to maneouver the PACC System; which was the automated clearance system installed for clearance of goods at the port; that Goods Declaration clearly stated that the goods fell under Cl.(9) of Part-II of the Second Schedule to the Income Tax Ordinance, 2001 for the purposes of collection of tax @ 1% under S.148 of the Income Tax Ordinance, 2001; that Federal Board of Revenue might be justified to withdraw its clarification issued earlier but by no stream of law the same could have been withdrawn with retrospective effect and any collection now on the basis of change of views by the Federal Board of Revenue would result into heavy loss; that if it was considered that the clarifications were void, yet the authorities slept over the matters for almost three years and goods cleared in July 2009 were not subjected to the same scrutiny earlier, rather they waited for the issuance of directions from the Federal Board of Revenue; and that an executive direction/notification could not be withdrawn retrospectively but would have a prospective effect---Validity---Authorities below erred in holding that the Federal Board of Revenue had an authority to withdraw its clarifications with retrospective effect---Executive orders which created vested rights could not operate or be withdrawn retrospectively---Appellate Tribunal did not agree with the point that the Federal Board of Revenue would initially give a benefit and then withdraw the same with retrospective effect---Such act itself fell within the parameters of promissory estoppel and the clarification issued shall be applicable prospectively and orders passed by the two authorities below were illegal, without jurisdiction and were vacated.

Naved A. Andrabi for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 14th December, 2012.

2013 P T D 639

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs TECHNO FABRIK (PVT.) LTD.

Versus

C.I.R. UNIT-VIII, R.T.O., KARACHI

S.T.A. No.134/KB of 2012, decided on 7th November, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 11, 21(3), 37-B, 33, 36 & 73---Assessment of tax---Adjustment of input tax---Show cause notice was issued on the basis of F.I.R. under S.37-B of the Sales Tax Act, 1990---Tax was assessed on the ground that taxpayer had purchased goods from the supplier, which had been declared a fake/fictitious unit and had claimed input tax credit---Taxpayer contended that order of First Appellate Authority was against the facts of availability of proof of payments i.e. copies of cheques in the name of supplier, bank statement showing transfer of such cheques amounts from the bank account, certificate of the banker that the amounts of cheques had been transferred from the bank account in to the bank account of supplier, and proof of physical transfer of goods i.e. weigh bridge receipts; that First Appellate Authority malafiedly found that the taxpayer had failed to substantiate submission with the documentary evidence and did not provide any evidence as regard to the fulfillment of the provisions of S.73 of the Sales Tax Act, 1990 and failed to provide any documentary evidence as regard to transfer of goods; and that First Appellate Authority purposely, deliberately and malafiedly did not adjudicate upon the issue of limitation of passing order-in-original which was barred by limitation---Validity---Taxpayer had furnished documentary evidence with regard to physical transfer of goods i.e. Weigh Bridge receipts---When goods had been transported through hiring trucks/vehicles from stands there seemed to be no other documents like bilties---Department had not doubted/challenged such documents---All the documentary evidence with regard to transfer of sale proceeds from the bank account of the taxpayer including copies of account payee crossed cheques in the name of supplier had been found to be already furnished to the authorities---Taxpayer had fully complied with the provisions of S.73 of the Sales Tax Act, 1990---Adjustment of input tax credit in respect of goods purchased from the supplier, whose registration had been suspended later on, could not be rejected/denied to the taxpayer who had already been held to had complied the provisions of S.73 of the Sales Tax Act, 1990---Order-in-original had been passed after a long period of expiration of limitation and even statutory extended period of limitation---Order-in-original having been passed after 238 days of the issuance of show cause notice same was passed much after the 180 days, including the statutory extended period of 60-days which was barred by limitation and nullity in the eye of law---Order-in-original was annulled and order-in-appeal was set aside by the Appellate Tribunal.

2012 PTD (Trib.) 350; 2012 PTD (Trib.) 619; 1984 PTD 216; 2012 PTD (Trib.) 885; GST 2005 CL 562; 2012 PTD (Trib.) 846; 2008 PTD 60 and 2009 PTD 1978 rel.

Syed Irshad-ur-Rehman for Appellant

Dr. Aftab Imam, DR-RTO-II for Respondent.

Date of hearing: 24th September, 2012.

2013 P T D (Trib.) 654

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Sohail Afzal, Accountant Member

Messrs ROYAL EXPORTS, FAISALABAD

Versus

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

M.A (Stay) No.1000/LB along with S.T.A. No.1041/LB of 2012, decided on 21st November, 2012.

Sales Tax Act (VII of1990)-

--S. 21---Sales Tax Rules, 2006, Chapter-1, R.12---S.R.O. 283(1)/ 2011 dated 1-4-2011---Sales Tax General Order No. 3 of 2004 dated 12-6-2004, Cl.'N'---De-registration, blacklisting and suspension of registration---Special team visited business premises of the taxpayer at their declared business address and found the same as office and residence of an advocate and the premises was being used by the advocate since 1997 and it was denied by him to know the whereabouts of the taxpayer; that lease agreement was found fake as owner of the property disowned the same; that profile of the taxpayer had shown fake/suspicious activity; and that show cause notice was issued for suspension of sales tax registration along with punitive action under the law---Taxpayer filed written submission and requested for opportunity of being heard before taking any adverse action---Reply tendered by the taxpayer could not satisfy the authorities and charges were upheld---Taxpayer contended that order was passed on ex parte basis without giving any opportunity of being heard and without confronting the charges levelled against him; that if a registered person was not available on his declared address then he should have been penalized under S.33(4) of the Sales Tax Act, 1990 and his registration could not be suspended; that buyer and suppliers of the taxpayer were operative and showing hundred percent tax compliance level as available at Federal Board of Revenue's website; that no supplies were made to any un-registered person; that charges of violation of S.R.O. 282(1)/2011 dated 1-4-2011 which was applicable if the supply was made to any person other than registered one also stood against the facts and law: and that under the provision of S.21(2) of the Sales Tax Act, 1990, the Commissioner could suspend the registration of a registered person only in case of any evasion of tax or in case fake invoices issued by him but these charges were never levelled in the show cause notice and adjudging of the same in the order rendered the whole exercise beyond the scope, stance and contents of show cause notice---Validity---Commissioner Inland Revenue had passed the order by suspending the registration of the taxpayer without affording him with any opportunity of hearing despite clear provisions in Cl. 33 of Sales Tax General Order No.3/2004 dated 12-6-2004 which laid down that if the Collector was satisfied that the person needed to be blacklisted or his registration suspended, he shall first issue notice to the registered person and give him an opportunity of being heard---Any order affecting the rights of the person without affording any opportunity of hearing and confronting the charges levelled against him was an illegal and void order---Any exercise conducted without due process of law was illegal and unlawful and without jurisdiction---Order passed on account of suspension of registration of the registered person was illegal, ab initio void and against the doctrine of natural justice which warranted to be overruled---No body could be penalized without any proper adjudication and devoid of adjudging any liability against him, such kind of action by the tax functionaries was totally in defiance of law which was not permissible under any provisions of law of the land---Department was directed to continue the verification of the invoices issued by the seller and the purchaser to know the actual position of the case and if the department found that those were genuine and properly issued by both the parties then decide the case in accordance with law.

1987 SCMR 1840; Writ Petition No.6990 of 2012 and J.M. Corporation v. Federation of Pakistan and others 2012 PTD (Trib.) 219 rel.

Khubaib Ahmed for Appellant.

Imtiaz Ahmed, D.R. for Respondent.

Date of hearing: 20th November, 2012.

2013 P T D (Trib.) 718

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Sohail Afzal, Accountant Member

WORLD TELECOM LIMITED, LAHORE

Versus

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

S.T.A. No.579/LB of 2012, decided on 18th October, 2012.

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

----Third Sched. Table-II, Sr. No. 2(i) & (ii)---Sales Tax Act (VII of 1990), Ss. 8(2), 25, 32-A & 72B---Charge of non-making of apportionment of input tax adjustment by registered person---Issuance of show cause notice and passing of re­assessment order by Deputy Director, Intelligence & Investigation-FBR after conducting special audit of assessee's record on approval granted by Federal Board of Revenue---Validity---Board alone had power to select persons for audit of tax affairs through computer ballot---Special, audit of record of registered person could be conducted by an officer of Inland Revenue under S. 25 of Sales Tax Act, 1990 or Chartered/Cost Accountant appointed by Board through notification under S. 32-A thereof---Commissioner had neither requisitioned record of assessee nor authorised any officer to conduct its audit---Impugned audit of 4sessee's record by such Director though under approval granted by Board but without authorization from Commissioner or any officer equivalent to his rank for being violative of mandatory provisions of S. 25 of the Sales Tax Act, 1990 was without jurisdiction---Principles.

Izhar Alam Farooqi v. Sheikh Abdul Sattar Lasi and others 2008 SCMR 240; Messrs Kamran Industries v. Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68; Faqir Abdul Majeed Khan v. Distt Returning Officer and others 2006 SCMR 1713; Messrs Global (Pvt.) Ltd. and an others v. Commissioner Inland Revenue, RTO Multan S.T.A. No.530/LB of 2011 and Messrs Ibrahim Steel Casting, Dewab Nagar Road, More Emanabad, Gujranwala v. Commissioner Inland Revenue (Appeals), Lahore STA No.55/LB of 2012 ref.

Messrs Kamran Industries v. Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68 rel.

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

----Ss.25 & 32A---Powers of Commissioner, Inland Revenue---Scope---Commissioner could neither amend nor legislate any provision of law at his own, rather could interpret same while passing any order according to his wisdom---Principles.

Malik Muhammad Arshad and Mian A.R. Bari for Appellants.

Aftab Aalam, D.R. for Respondent.

Date of hearing: 10th October, 2012.

2013 P T D (Trib.) 738

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Sohail Afzal, Accountant Member

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

Versus

Messrs DESCON CHEMICALS (PVT.) LTD., LAHORE

I.T.A. No.12/LB of 2011, decided on 11th October, 2012.

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

----Ss. 122(5A) & 120---Amendment of assessment---Assessment was amended on ground of being erroneous in so far as it was prejudicial to the interest of revenue by making various additions---Appeal was accepted by the First Appellate Authority---Revenue contended that First Appellate Authority was not justified in deleting the addition on account of financial expenses---Validity---First Appellate Authority had extensively discussed the issue and examined the evidence available on record and case law and deleted the addition with observation that as per detail given with the help of audited accounts the taxpayer had sufficient funds for the advancement of loan to the associated undertakings; that the same situation existed in an other tax year and Taxation Officer after confronting the taxpayer did not make any addition and accepted same by saying that the amount in question was not loan but balance of inter-group transactions---Finding of the First Appellate Authority were in accordance with the facts of the case and law on the subject and it needed no interference---Appeal filed by the revenue was dismissed being devoid of any merits.

Aftab Alam, D.R. for Appellant.

Muhammad Waseem Ch. And Muhammad Arshad for Respondents.

Date of hearing: 11th October, 2012.

2013 P T D (Trib.) 740

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti and Sohail Afzal, Accountant Member

Messrs UNITY TRADERS, LAHORE

Versus

COMMISSIONER INLAND REVENUE, (APPEALS-III), LAHORE

S.T.A. No.242/LB of 2012, 12th December, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 7, 23, 36, 46 & 73---Tax fraud---One firm was found involved in issuance of fake/flying invoices to other registered persons facilitating them to claim illegal and inadmissible input tax adjustment---Criminal case was got registered against said fraudsters---Department alleged that registered persons had connived with the said form for the fraud---Validity---Registered person was engaged in whole sale business and supply was made to the to verified purchasers since long---Under provisions of S.2(37) of Sales Tax Act, 1990 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---No evidence was available wherefrom it could be deduced that registered person had knowingly, dishonestly or fraudulently committed fraud claiming input tax adjustment against the sales tax invoices issued by the alleged fraudster gang---Even the audit/contravention report could not establish with any concrete reasoning that registered person involved in tax fraud by claiming illegal sales tax input tax and had violated the provision of S.2(37) of Sales Tax Act, 1990---Department had failed to fasten blame at the registered person's door---Entire edifice had been built, to hold registered person as fraudulent on conjectures and surmises, and whimsical inference had been drawn against the registered person---All the payments were made by the registered person in accordance with provisions of S.73 of the Sales Tax Act, 1990 and had no prior knowledge about fakeness of the sales tax invoices issued by the suppliers---Registered person had clean tax history, which clearly depicted that huge payment of tax was being made towards the National Exchequer by the registered person---Proper show-cause notice as envisaged under S.36 of Sales Tax Act, 1990, having not been issued to the registered person proceedings conducted in pursuance thereof could not have any legal consequences in the eye of law---Findings recorded by both authorities below, were declared, null and void and of no legal consequences.

2007 PTD 2265; GST 2004 CL 71, GST 2003 CL 562 and GST 2004 CL 79 ref.

Muhammad Farooq Sheikh for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 12th December, 2012.

2013 P T D (Trib.) 755

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal Accountant Member

Messrs SHAHEEN PAPER AND BOARD INDUSTRIES (PVT.) LTD., KASUR

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE (ADJUDICATION), LAHORE

M.A. (AG) No.95/LB and F.E.A. No.16/LB of 2009, decided on 12th December, 2012.

Central Excise Act (I of 1944)---

----Ss. 3 & 4---Determination and levy of central excise duty---Principals---Excise duty was to be assessed on the value of product/(paper) and that value had to be calculated in accordance with S.4 of Central Excise Act, 1944 whereby value for the purpose of assessment was the wholesale cash price for which the goods were sold for delivery at the place of manufacture and at the time of their removal therefrom, less any trade discount---Taxpayer/manufacturer, sold their product/(paper) for a cash price to distributors, who sell the same to wholesale dealers, and wholesale dealers, passed the same on the market---From the cash price which the distributor was to pay, when they received goods from the factory they deducted a discount, part of which, the distribute retailed for himself, the other part being intended for the wholesale dealers to whom they sold the goods---Contention of appellant/manufacturer was that distributor being a privileged person and the agent of manufacturer, discount allowed to him was not the trade discount contemplated by S.4 of the Central Excise Act, 1944; in the alternative it was contended that only that part of the discount should be deducted which was intended for the wholesale dealer---Authorities, regarded the introduction of the distributor between the manufacturer and the wholesale dealer as unnecessary and one which would affect the amount of excise duty, which had to be realized---For the purpose of assessment of duty, it was not material, whether their introduction was necessary---Intention of law was that excise duty should be paid by the manufacturers on the amount which they actually received---Demand for additional duty made by the Authorities being unjustified, same was not maintainable, in the eye of law---Finding recorded by the Authorities, was declared null and void and of no legal consequence---Show-cause notice issued to the manufacturers, and impugned order-in-original, was annulled being not maintainable.

Muhammad Farooq Sheikh for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 12th December, 2012.

2013 P T D (Trib.) 777

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs D.G. KHAN CEMENT COMPANY LIMITED, LAHORE

Versus

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

S.T.A. No.1159/LB of 2009, decided on 18th October, 2011.

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

----Ss.7(1) & 8(a)---Input tax adjustment claimed against bills of electricity consumed in residential areas and administrative offices in Cement Factory of taxpayer---Validity---Such use of electricity was meant for furtherance of taxable supply, thus, was admissible.

S.T.A. No.1392; 2007 PTD 473; 2006 PTD (Trib.) 196; 2005 PTD (Trib.) 1358; Messrs Pioneer Cement Limited, Khushab's case S.T.A. No.807/LB/2002; S.T.A. No.1392/LB of 2009; 2010 PTD (Trib.) 1874 and Messrs Nishat Mills Ltd. v. Superintendent of Central Excise PLD 1989 SC 222 ref.

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

----Ss.7(1) & 8(a)---Input tax adjustment claimed against bills of electricity consumed in residential areas and administrative offices situated within Cement Factory of the taxpayer---Non-mentioning of sales tax registration number of taxpayer on such bills---Effect---Such default on part of taxpayer was a procedural lapse---Claimed adjustment could not be denied on such technical ground.

PLD 1998 SC 64 ref.

Malik Ahsan Mehmood for Appellant.

Dr. Ishtiaq Ahmad D.R. for Respondent.

2013 P T D (Trib.) 788

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Sohail Afzal, Accountant Member

Messrs SAEED BUKSH (PVT.) LIMITED, LAHORE

Versus

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

I.T.As. Nos.1367/LB and 1368/LB of 2012, decided on 2nd November, 2012.

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

----Ss.122(5A) & 115---Amendment of assessment---Statements under S.115 of the Income Tax Ordinance, 2001 were filed; on examination of accounts, it was observed that cost of sales declared was much more than the sales declared by way of imports; and it was inferred that taxpayer must have made local purchases and enjoyed income by way of sales of locally purchased goods---Show cause notice was issued to estimate the income of locally purchased goods---Taxpayer contended that exaggerated figure of cost of sales was for the purpose of bank loan facilities which had no impact on the sales; that not even a single outlet ever had locally purchased goods; and that there was nothing on record to establish the erroneousness and prejudice caused to the interest of revenue---Another notice was issued asking for the submission of audited accounts and bank account statement; and on no response, income on the basis of estimation was assessed---Validity---Nothing was available on record which could establish actual existence of local purchases and local sales and that the taxpayer earned income to the extent estimated by the Assessing Officer---Revision resulting into estimation of income was based upon assumption and guesswork---Calling for the audited accounts and bank statements through second notice was an act completely out of jurisdiction for the purposes of amendment under S.122(5A) of the Income Tax Ordinance, 2001---Assessing Officer wanted to make inquiries for the amendment which act was illegal---First show cause notice issued was defective as the same had no definite material to establish the co-existence of erroneousness and prejudice rather it needed further enquires---No such information was available on record that cost of sales actually represented local purchases and to establish that the taxpayer had receipts/income from the sale of locally purchased goods---Assessing Officer had asked for the documents/record and showed his intention or the estimation of receipts from the locally purchased goods---Action was based on assumptions which was not allowable in proceedings under S.122(5A) of the Income Tax Ordinance, 2001---Action of the Assessing Officer was ab-initio illegal as there was no proper basis for invoking provisions of S.122(5A) of the Income Tax Ordinance, 2001---Action of Assessing Officer was clearly a case of estimation of income which was out of purview of S.122(5A) of the Income Tax Ordinance, 2001---Amended assessment order was cancelled by the Appellate Tribunal.

2009 PTD (Trib.) 121; 1999 PTD (Trib.) 700; 1999 PTD (Trib.) 2851 and 2008 PTD (Trib.) 1491 ref.

2010 PTD (Trib.) 111; 2012 PTD (Trib.) 1593 and 2008 PTD 342 rel.

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

----S.122 (5A)---Income Tax Ordinance (XXXI of 1979), S.66A---Amendment of assessment---Definite information---Enquiries or call for the documents/record---Jurisdiction---Provisions of S.122 (5A) of the Income Tax Ordinance, 2001 were different from the provisions of S.66A of the Income Tax Ordinance, 1979---Officer authorized to make amendment under S.122(5A) of the Income Tax Ordinance, 2001 had no authority/jurisdiction to enter into enquiries or call for the documents/record to arrive at some conclusion---Definite information regarding erroneousness and prejudicial must be visible from the face of record.

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

----S.122 (5A)---Amendment of assessment---Fishy enquiries---Appellate Tribunal disapproved fishy enquiries for the invocation of S.122 (5A) of the Income Tax Ordinance, 2001, such approach, if allowed, would result into gross misuse of provisions of law and mere suspicion could not be a basis to invoke S.122 (5A) of the Income Tax Ordinance, 2001---Notices pointing out deficiencies and asking for explanations, documents, evidences were invalid.

Muhammad Waseem Chaudhary and Muhammad Arshad for Appellants.

Nabila Iqbal D.R. for Respondent.

Date of hearing: 2nd November, 2012.

2013 P T D 807

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah Judicial Member and Sohail Afzal Accountant Member

MUHAMMAD ASHRAF

Versus

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

S.T.A. No.519/LB of 2012, decided on 18th June, 2012.

Sales Tax Act (VII of 1990)---

----Ss.21(2), 25A, 38 & 2(23)---Sales Tax Rules, 2006, Rr. 2(5) & 5(1)(c)---Sales Tax General Order No.3 of 2004 dated 12-6-2004---S.R.O.555(I)/2006, dated 5-6-2006---De-registration---Jurisdiction---Status of the registered person was suspended from the date of its registration till further order by the Commissioner Inland Revenue---Taxpayer contended that order under S.21 of the Sales Tax Act, 1990 was passed without giving reasonable opportunity of being heard and even the allegations were outside the scope of S.21 of the Sales Tax Act, 1990; that sample data obtained under Ss.25A/38 of the Sales Tax Act, 1990 was without adopting due procedure of law; that the jurisdiction of the Commissioner was challenged but the Commissioner instead of resolving the issue of jurisdiction, passed an illegal order under S.21 of the Sales Tax Act, 1990 and suspended the registration of the registered person without affording an opportunity of explaining the allegations levelled in the show-cause notice; and that whole story of the suspension order was based on flimsy grounds and without recording any facts on record---Validity---Taxpayer had duly; mentioned both the addresses in his application and principal place of business of the taxpayer was his manufacturing unit---Facts were not properly appreciated by the Commissioner---Scope of General Order No.3 of 2004 was very limited where manufacturing unit/office was not traceable, but no such dispute arose in the case---Department could have initiated proceedings under S.36 of the Sales Tax Act, 1990 against evasion of tax, if any---Mention of definition of "registered office" in S.2(33) of the Sales Tax Act, 1990, in the order was inapt and provision of R.5(I)(c) of the Sales Tax Rules, 2006 was applicable---Rule was not inconsistent with the provisions of Sales Tax Act, 1990---Proceedings initiated were without lawful jurisdiction as jurisdiction over the case vested with the said Commissioner Inland Revenue and all the proceedings initiated vide notices issued under Ss.25A, 38 as well as order passed under S.21 of the Sales Tax Act, 1990 by the said Commissioner Inland Revenue were without lawful jurisdiction---Order being without any lawful jurisdiction was cancelled by the Appellate Tribunal.

M.A. (AG) No.60/LB of 2012; S.T.A. No.669/LB of 2011, dated 10-5-2012; Mahmood Barni v. I.A.C. of Income Tax Gujranwala and others 2005 PTD 165 and Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Ltd. and others 2003 PTD 505 rel.

M. Imran Rashid and Farooq Ijaz, ITP for Appellants.

Mrs. Fouzia Fakhar D.R. and Ahmad Kamal, DCIT for Respondents.

Date of hearing: 18th June, 2012.

2013 P T D (Trib.) 834

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Muhammad Akram Tahir, Accountant Member

Messrs SHAHID CABLE INDUSTRIES, LAHORE

Versus

C.I.R., ZONE-VIII, R.T.O.-II, LAHORE

S.T.A. No.515/LB of 2012, decided on 5th March, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 36(3) & 11(4)---Recovery of tax not levied or short levied or erroneously refunded---Limitation---First Appellate Authority rejected the claim of input tax adjustment and remanded the matter regarding time limitation of order-in-original to the adjudication officer with the direction to communicate the taxpayer evidence regarding extension of time by the Commissioner---Taxpayer contended that order was barred by limitation of time by 120 days as specified under first proviso to S. 11(4) of the Sales Tax Act, 1990; and that admittedly show-cause notice was issued on 3-2-2011 whereas the order was passed on 28-7-2011 which was time barred---Revenue contended that Commissioner vide letter dated 9-6-2011, had specifically extended the time period for passing the adjudication order up to 31-7-2011, the same was within the time limitation as the order was passed on 28-7-2011---Taxpayer contended that limitation expired on 3-6-2011, whereas the extension in time was allowed on 9-6-2011 which was allowed after expiry of limitation and the same had no sanctity in the eye of law---Validity---Order-in-original was time barred as the same was passed beyond the limitation provided under the law---Adjudicating officer was under legal obligation to pass the order within the specified period of 120 days---Show cause notice was issued on 3-2-2011 and the Adjudicating Officer was under legal obligation to pass the order up to 3-6-2011 which he had failed to do as the order was passed on 28-7-2011 which was beyond the time limitation provided under S.36(3) of the Sales Tax Act, 1990---Letter dated 9-6-2011, regarding extension of time for passing the order had no sanctity in the eye of law as the extension was allowed by the Commissioner after lapse of statutory time limitation---Contention of revenue that taxpayer's request for adjournment should be taken into consideration while calculating the time limitation, was without any basis and justification; Assessing Authority on the face of order-in-original had mentioned that no adjournment was sought by the taxpayer---Order passed by the Assessing Officer was not maintainable in the eye of law being barred by time which was annulled---Order of First Appellate Authority was vacated by the Appellate Tribunal---Departmental appeal was rejected and that of taxpayer's accepted.

2009 PTD 762 rel.

Mrs. Sadia Sadaf, DR for Appellant.

M. Farooq Sh., for Respondent.

Date of hearing: 5th March, 2013.

2013 P T D (Trib.) 843

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Yusuf Ghaffar Khan, Accountant Member

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

Versus

ASSISTANT COMMISSIONER (AUDIT-VI) INLAND REVENUE, PESHAWAR and another

S.T.A. No.174(PB) of 2011, decided on 20th June, 2012.

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

----Ss.36, 7, 8(1)(ca), 8(1)(d), 11 & 73---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Taxpayer contended that assessment order was barred by limitation as the same was passed after lapse of 179 days whereas the law required that order-in-original should be passed within 120 days of issuance of show cause notice or within such extended period as the Commissioner may for reason to be recorded in writing for further 60 days---No sufficient reasons had been recorded by the Commissioner for the extension of time, while further extension had been granted after the period of 120 days already stood expired to this effect---Validity---Period of limitation could be extended but permission of extension must be given by the Commissioner by recording sufficient reason of extension before the expiry of prescribed period of limitation as mentioned in S.36(3) of the Sales Tax Act, 1990---No sufficient reason had been recorded by the competent authority about the extension of time---Show-cause notice and order-in-original was vacated by the Appellate Tribunal.

2009 PTD 762; 2010 PTD 251; 2009 PTD 2004 and 2008 PTD 2025 rel.

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

----S. 3---Duties specified in the First Schedule to be levied---Charging S.3 of the Federal Excise Act, 2005 speaks of levy of duty on goods produced or manufactured---No provision of Act or the Rules made thereunder exists which allows the Assessing Officer of Inland Revenue to determine the duty of excise or sales tax on the basis of production capacity of the machines or the consumption of electricity in the manufacture of such goods---Under S.3(3)(a) of the Federal Excise Act, 2005 the Federal Board of Revenue could by a notification in the official Gazette, in lieu of levying and collecting duties of excise under S.3(1) of the Federal Excise Act, 2005 levy and collect duties on the production capacity of plants, machinery or installation producing or manufacturing such goods.

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

----S. 3---Duties specified in the First Schedule to be levied---Calculating production on the basis of consumption of electricity---Method despite being unfair and unjust is in conflict with the provision of S.3 of the Federal Excise Act, 2005.

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

----S.2 (35)---Taxable activity---Under S.2 (35) of the Sales Tax Act, 1990 the yardstick to charge and levy sales tax is the sale constituting a taxable activity for a taxable supply.

Government of Pakistan v. Shahi Bottlers Ltd. 1987 SCMR 571 ref.

2008 PTD 103 rel.

(e) Interpretation of statutes---

----Fiscal---Legislation---Tax must be levied or charged in clear, unambiguous and specific terms and could not be levied on presumption or importing something which the legislature had not provided therein.

(f) Sales Tax---

----Assessment of production---Assessment of tax on the basis of consumption of electricity is hardly a safe rule and yardstick to assess the production.

2010 PTD (Trib.) 408 rel.

(g) Sales Tax---

----Input adjustment---Scope---Such adjustment could not be disallowed because genuineness of the purchase invoices had not been challenged.

Ishtiaq Ahmed for Appellant.

Mir Alam Khan, DR and Shuaib Sultan, IRAO for Respondent.

Date of hearing: 17th May, 2012.

2013 P T D (Trib.) 871

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Yusuf Ghaffar Khan, Accountant Member

Messrs INTER CONSTRUCT (PVT.) LTD., PESHAWAR

Versus

REGIONAL TAX OFFICER, PESHAWAR

I.T.A. No.157(PB) of 2012, decided on 17th December, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 113, 169(2), 11, 122(5A), 122(9), 120, & Second Sched., Part-II, Cl.126-F---Minimum tax on the income of certain persons---Exemption---Amendment of assessment---Revised return was filed declaring non-exempt receipts and exempt-receipts with claim of refund as exempt under Cl.126-F of Part-II of the Second Schedule to the Income Tax Ordinance, 2001---Taxation Officer observed that taxpayer was liable to pay turnover tax under S.113 of the Income Tax Ordinance, 2001 on the declared turnover---Show cause notice was issued, deemed assessment order was amended and minimum tax was levied under S.113 of the Income Tax Ordinance, 2001---Validity---Income was assessable under presumptive tax regime as per S.169(2) of the Income Tax Ordinance, 2001---Such income was not taxable under any of the heads of income as envisaged in S.11 of the Income Tax Ordinance, 2001; and no tax was leviable under any other provision of Income Tax Ordinance, 2001, except the tax withheld under S.169(2) of the Income Tax Ordinance, 2001---Income of the taxpayer did not fall under the provision of S.11 of the Income Tax Ordinance, 2001---In a case of presumptive tax regime no tax under S.113 of the Income Tax Ordinance, 2001 was chargeable which, was deleted by the Appellate Tribunal.

2010 SCMR 1236 = 2010 PTD 1809 rel.

Abdur Rehman Afridi for Appellant.

Mir Alam Khan, DR for Respondent.

Date of hearing: 16th November, 2012.

2013 P T D (Trib.) 881

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Muhammad Akram Tahir, Accountant Member

Messrs CH. AMIR GHAFOOR BROTHERS, LAHORE

Versus

C.I.R., ZONE-V, R.T.O., LAHORE

S.T.A. No.450/LB of 2012, decided on 5th March, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 45-B(3), 11(2) & 36---Appeal---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Show cause notice was issued on the basis of information that taxpayer had claimed illegal input tax on invoices issued by one of his supplier, which was, allegedly, involved in issuing fake invoices and required the taxpayer to explain as to why the amount of sales tax should not be recovered from the taxpayer along with default surcharge and penalty---No reply to show cause notice was submitted---Assessing authority proceeded to pass ex parte order-in-original and directed the taxpayer to pay sales tax along with default surcharge and penalty---First Appellate Authority found that assessment had been framed without confronting the taxpayer and appreciating the true position and that such an order was not sustainable and was set aside and matter was remanded to the adjudicating officer with the direction to afford reasonable opportunity to the taxpayer and for passing fresh speaking order strictly in accordance with law---Taxpayer contended that First Appellate Authority was not justified to remand the case as he was not competent to provide another chance to the Assessing Officer to improve his case; that input tax was paid against purchases and had made compliance to the provisions of S.7 of the Sales Tax Act, 1990; that status of the supplier unit was checked at the time of transaction which was active; that supplier's status was suspended w.e.f. August 16, 2010, whereas the taxpayer made transaction with him in the month of February, 2010; and that all the conditions laid down in the Sales Tax Act, 1990 had been fulfilled---Validity---First Appellate Authority should have cancelled the order-in-original rather than remanding the matter back to the Assessing Officer---First Appellate Authority had given a categorical finding that "from the above discussion, it is evident that assessment had been framed without confronting the appellant and appreciating the true position. Such an order therefore is not sustainable and is accordingly set aside"---In presence of such unequivocal observation/finding, the First Appellate Authority was not justified to remand the matter back to the Assessing Officer for fresh proceedings as such a direction was tantamount to give a chance to the department to fill in the lacuna to improve their case---Provisions of subsection (3) of S.45-B of the Sales Tax Act, 1990 did not empower the First Appellate Authority to remand the case---Ample justification existed for the taxpayer to claim adjustment of input tax as at the time of transaction, the status of the supplier's unit on Federal Board of Revenue system was "active" and they were regularly submitting their returns and summary thereof---All the payment made were in accordance with law and the taxpayer did not have any prior knowledge about the sales tax invoices issued by the supplier unit being fake---No case of tax fraud was made out against the taxpayer---Department failed to prove the charge of tax fraud against the taxpayer and First Appellate Authority erred in law in remanding the case to the Assessing Officer for fresh proceedings---Order passed by the Assessing Officer was not maintainable in the eye of law which was annulled by the Appellate Tribunal and order of First Appellate Authority was vacated.

2012 PTD (Trib.) 350 and S.T.A. No.478/LB of 2012 rel.

M. Farooq Sh., for Appellant.

Mrs. Sadia Sada, DR for Respondent.

Date of hearing: 5th March, 2013.

2013 P T D (Trib.) 892

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javed Iqbal, Judicial Member and Farzana Jabeen, Accountant Member

Messrs DELUXE PACKAGES (PVT.) LTD., KARACHI

Versus

C.I.R., AD-II, R.T.O., KARACHI

S.T.A. No.32/KB of 2012, decided on 6th December, 2012.

Sales Tax Act (VII of 1990)---

----Ss.7, 8 & 25---General Clauses Act (X of 1897), S.24-A---Determination of tax liability---Purchases from the blacklisted/blocked suppliers---Inadmissibility of input tax---Taxpayer contended that First Appellate Authority had failed to consider the explanation/supporting documents at the time of appeal proceedings substantiating that all suppliers were active tax payers at the time of executing purchase transactions and question of inadmissibility of sales tax input tax was not sustainable---Revenue contended that Officer of Inland Revenue was quite justified in disallowing the input tax claimed by the taxpayer against invoices issued on purchases made from the blacklisted/blocked suppliers which were inadmissible in terms of Ss.7 & 8 of the Sales Tax Act, 1990---Validity---In the absence of record, Appellate Tribunal did not give exact verdict as to whether the units were blacklisted at the time of supply or not---If such units were not blacklisted at the time of supplies and the taxpayer had fulfilled all the other formalities, such a payment to suppliers had been transacted through banking channels as envisaged in S.73 of the Sales Tax Act, 1990 and taxpayer was in possession of valid invoices issued to the taxpayer, the claim of tax should be allowed to him, and if supplier had not fulfilled his obligation through depositing the tax paid by the taxpayer, tax should be recovered from suppliers, taxpayer could not be punished for the sin and wrong of suppliers.

S.T.A. No.217/2004(K-2) rel.

Muhammad Naseem for Appellant.

Aslam Mari, D.R. for Respondent.

Date of hearing: 6th December, 2012.

2013 P T D (Trib.) 900

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

HAMID ZAMAN & SEEMA AZIZ (AOP)

Versus

COMMISSIONER INLAND REVENUE, ZONE-VIII, R.T.O.-II, LAHORE

I.T.As. Nos.1696/LB to 1698/LB and 1825 to 1827 of 2012, decided on 9th January, 2013.

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

----Ss. 122(5A), 21(l) & 174(2)---Amendment of assessment---Withdrawals from banks---Assessing Officer while proceeding under S.122 (5A) of the Income Tax Ordinance, 2001 considered the amount of withdrawals from the banks as expenditure and afterwards held that expenses were not made through cross-cheques and addition under Ss.21 (l)/174(2) of the Income Tax Ordinance, 2001 was made---First Appellate Authority recorded that "observations of Assessing Officer were purely based on presumption and there was no material on record to suggest that the expenses charged to trading and profit & loss account were without supporting evidence; that without first establishing that expenses were not supported by documentary evidence required the taxpayer to prove that the expenses charged were not hit by S.174(2) of the Income Tax Ordinance, 2001; that every piece of receipt, voucher or bill was requisitioned from the taxpayer in support of entire expenses charged to trading and profit and loss account, which amounted to conducting audit of the taxpayer; that Additional Commissioner was not empowered under S.122(5A) of the Income Tax Ordinance, 2001 to call for account books and conduct enquiries; that power to call for account books of the taxpayer could be exercised only while conducting audit under S.177 of the Income Tax Ordinance, 2001 and taxpayer was not required to produce books of account or other documentary evidence to prove that expenses claimed by it were not inadmissible under S.174(2) of the Income Tax Ordinance, 2001; that assumption of jurisdiction under S.122(5A) of the Income Tax Ordinance, 2001 was defective; that further, invoking two district provisions of law having entirely different scope for making disallowance of the same amount was contrary to established principles and also spoke of the fact that the Additional Commissioner was not sure whether to invoke S.21(l) of S.174(2) of the Income Tax Ordinance, 2001; that could be imposed through clear word of law only and not on the basis of presumption, that without identifying heads under which the expenses were incurred and the Assessing Officer went a step further to presume that expense for transaction under each head exceeded Rs.50,000 and that each transaction under a particular head of account exceeded Rs.10,000 and that there was no specific amount before the Assessing Officer which could attract S.21(l) of the Income Tax Ordinance, 2001 and the addition had been made purely on the basis of presumptions"---Revenue contended that First Appellate Authority wrongly deleted addition as it was clear that cash withdrawal from banks exceeded the limit as provided under S.21(l) of the Income Tax Ordinance, 2001 and the Taxation Officer had rightly assumed that it attracted the provisions of S.21(l) of the Income Tax Ordinance, 2001---Validity---Appellate Tribunal agreed with the order of First Appellate Authority in view of submission made by the taxpayer and reasoning assigned by the First Appellate Authority---Addition made under Ss.21(l)/174(2) of the Income Tax Ordinance, 2001 had rightly been deleted by the First Appellate Authority.

PLD 1992 SC 549 = 1992 PTD 932; 2008 PTD (Trib.) 1494; 2012 PTD 723; 1990 PTD (Trib.) 1019 and 2009 SCMR 1279 = 2009 PTD 1392 ref.

1999 PTD (Trib.) 2851; 2009 PTD (Trib.) 121; 2010 PTD (Trib.) 111; 2010 PTD (Trib.) 1067; 2010 PTD (Trib.) 1552; 2012 PTD (Trib.) 1593 and 2012 PTD (Trib.) 1444 rel.

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

----Ss.111 & 122(5A)---Un-explained income or assets---Peak deposit in the bank account exceeding the capital of Association of Persons were included in taxable income---Addition was confirmed by the First Appellate Authority---Taxpayer contended that addition under S.111(1)(b) of the Income Tax Ordinance, 2001 could not be made under S.122(5A) of the Income Tax Ordinance, 2001 on the basis of inquiry---Validity---Pre-condition for making addition under S.111 of the Income Tax Ordinance, 2001 was to get explanation from the taxpayer about nature and source of the amount and thereafter, considering the explanations, addition was to be made "to the extent amount was not adequately explained"---Addition made under S.111(1)(b) of the Income Tax Ordinance, 2001 could not be made without making inquiry---Firstly Assessing Officer would ask the taxpayer to submit explanation regarding nature and source of amount and after considering explanation, then addition under S.111(1)(b) of the Income Tax Ordinance, 2001 would be made---Asking for explana-tion meant conducting of inquiry which was beyond the scope of S.122(5A) of the Income Tax Ordinance, 2001---Additions made under S.111(1)(b) of the Income Tax Ordinance, 2001 were ordered to be deleted by the Appellate Tribunal.

1999 PTD (Trib.) 2851, 2009 PTD (Trib.) 121 and 2010 PTD (Trib.) 111 rel.

M. Iqbal Hashmi, Qadeer Ahmad and Muhammad Abu Bakar for Appellant (in I.T.As. Nos. 1696/LB to 1698/LB of 2012).

Miss Ayesha Imran Butt (DR) for Respondent (in I.T.As. Nos. 1696/LB to 1698/LB of 2012).

Miss Ayesha Imran Butt (DR) for Appellant (in I.T.As. No. 1825/LB to 1827/LB of 2012).

M. Iqbal Hashmi, Qadeer Ahmad and Muhammad Abu Bakar for Respondent (in I.T.As. Nos.1825/LB to 1827/LB of 2012).

Date of hearing: 21st December, 2012.

2013 P T D (Trib.) 920

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Mian Masood Ahmed, Accountant Member

Messrs CHERAT CEMENT COMPANY, NOWSHERA

Versus

COLLECTOR SALES TAX AND CENTRAL EXCISE, PESHAWAR

S.T.A. No.187/233(PB) of 2004/2009, decided on 16th February, 2012.

Sales Tax Act (VII of 1990)---

----Ss.36, 2(33) & 2(41)---Recovery of tax not levied or short-levied or erroneously refunded---"Taxable supply"---Taxpayer had not charged and paid sales tax on excavation of limestone and slate for own use to manufacture an exempt item i.e. cement---Such act was considered as violation of definition of "taxable supply" by the Revenue---Taxpayer contended that excavation of limestone for own consumption was not a taxable supply and no sales tax was ever paid by manufacturers of cement throughout the country; that limestone and clay were not taxable; that demand of sales tax was created by holding that raw material was taxable; that show cause notice issued under S.36(1) of the Sales Tax Act, 1990 was not applicable as there was no collusion, rather S.36(2) of the Sales Tax Act, 1990 was attracted; that tax on limestone and clay was not payable and the issue was yet to be decided whether any such tax was payable or not; that at the time of levy of tax through order-in-original no sales tax was payable; and that S.36(2) of the Sales Tax Act, 1990 was applicable to the present case---Validity---As per judgment of the Supreme Court raw material for own consumption of an industrial undertaking for manufacturing of end products and also the by-products fell within the definition of "supply" therefore taxable under the Sales Tax Act, 1990---Non-payment of sales tax in the light and presence of judgment of Supreme Court which had binding force of law could be termed deliberate act on the part on the registered person, therefore fell under the garb of S.36(1) of the Sales Tax Act, 1990 for which period of limitation had been prescribed as five years---Action taken by the adjudicating authority though was within 5 years, however, levy of tax was restricted to the period mentioned in the show-cause notice.

Collector Customs and Sales Tax v. Attock Cement GST 2002 CL 245 ref.

2001 SCMR 1376 = 2001 PTD 2097 rel.

Issac Ali Qazi for Appellant.

Mir Bad Shah Wazir, DR and Shuaib Sultan, IRAO for Respondent.

Date of hearing: 3rd November, 2011.

2013 P T D (Trib.) 936

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member

INTER CITY (PRIVATE) LIMITED, ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE, (LEGAL), LTU, ISALAMABAD

I.T.As. Nos.64/IB, 246/IB, 247/IB, 95/IB, 293/IB, 294/IB, 295/IB, 296/IB and 311/IB of 2011, decided on 10th January, 2013.

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

----Ss. 122(5A), 162, 153(1)(c), 153(6), 169(1)(b), 120, 114 & 115(4)---Amendment of assessment---Recovery of tax from the person from whom tax was not collected or deducted---Tax was levied by observing that receipts of the taxpayer were liable to withholding tax from payments made on account of contract executed by the assessee falling under the provisions of S.153(1)(c) of the Income Tax Ordinance, 2001 being final discharge of liability---Order was vacated by the Appellate Tribunal---Subsequent to Appellate Tribunal's order Additional Commissioner (Audit) again found the deemed order as erroneous and prejudicial to the interest of revenue on the similar grounds; and after usual proceedings the deemed order was amended under S.122(5A) of the Income Tax Ordinance, 2001 repeating the same income and liability as determined in the assessment order under S.162 of the Income Tax Ordinance, 2001---Such order was vacated by the First Appellate Authority---Revenue contended that earlier order was passed by the Taxation Officer under S.162 of the Income Tax Ordinance, 2001 and not by the Additional Commissioner; that after vacation of assessment order under S.162 of the Income Tax Ordinance, 2001 by the Appellate Tribunal the deemed assessment under S.120 of the Income Tax Ordinance, 2001 was restored and Additional Commissioner could amend the deemed assessment under S.122(5A) of the Income Tax Ordinance, 2001; that taxpayer was obliged to file statement under S.115(4) of the Income Tax Ordinance, 2001 instead of filing return of total income under S.114 of the Income Tax Ordinance, 2001; and that expression "deducted" was to be construed as "deductible"---Taxpayer contended that once the Appellate Tribunal had annulled the earlier order passed under S.162 of the Income Tax Ordinance, 2001 on legal as well as factual ground the Additional Commissioner had no jurisdiction to amend the same on similar grounds; that only legal course was to file appeal before High Court and since no appeal was filed the appellate order attained finality and action taken by the Taxation Officer under S.122(5A) of the Income Tax Ordinance, 2001 was illegal, and ab initio void; that action of Taxation Officer was belated rather it would be out of time because the issue involved was very old and already decided in appeal by the Appellate Tribunal and its re-adjudication was not supported by any norms or rule of law and ultimately it will result in futility and illegality; that since deemed order had once been amended under S.162 of the Income Tax Ordinance, 2001 and annulled in second appeal had merged into the Tribunal order, the deemed order was non-existent and was no-where in the field ; that even then, if order was erroneous and prejudicial, it was the appellate order that was erroneous and had to be amended by the higher authority the Tribunal and not the Additional Commissioner; that proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were revisional in nature and could not be exercised by a subordinate authority; that deemed order was merged into the appellate order, the Additional Commissioner being a subordinate authority had no power to amend the same; that, deemed order had been amended twice once under S.162 of the Income Tax Ordinance, 2001 and again under S.122(5A) of the Income Tax Ordinance, 2001 on similar grounds repeating the same action; that powers under S.122(5A) of the Income Tax Ordinance, 2001 were revisional and could not be exercised on the same material which had already been on record and considered; that after the turndown of assessment under S.162 of the Income Tax Ordinance, 2001, the Additional Commissioner resorted to action under S.122(5A) of the Income Tax Ordinance, 2001 on the basis of same old material/record/basis which was sheer change of opinion not allowed under the law; that legislature had introduced final taxation under S.169 of the Income Tax Ordinance, 2001 in respect of receipts from which tax was deducted under S.153 of the Income Tax Ordinance, 2001; that while no tax had been deducted under S.153 of the Income Tax Ordinance, 2001 by payer while making payment as the taxpayer was under litigation on the issue of status of prescribed person for the purpose of S.153 of the Income Tax Ordinance, 2001; that if the legislature intended to bring the taxpayer from whom tax was not deducted at source from payments under the ambit of final taxation then the word "deductible" would have been used in substitution of word "deducted" currently embodied in Ss.153(6) and 169(1)(b) of the Income Tax Ordinance, 2001; that word "deducted" was substituted with the word "deductible" in various withholding sections and S.169 of the Income Tax Ordinance, 2001 through Finance Act, 2012; and that legislature enlarged the scope of Presumptive Tax Regime effective from July 2012 onward---Validity---Held, in the first round of litigation the Appellate Tribunal had annulled the order passed under S.162 of the Income Tax Ordinance, 2001 (passed on similar cause)---Original order ceased to exist and stood merged in the appellate? order and legal course for the department was to file reference to the High Court---Since second appellate order remained un-challenged it had attained finality and invocations of provisions of S.122(5A) of the Income Tax Ordinance, 2001 were not sustainable---Department did not challenge the basis of the judgment through its grounds of appeal and only agitated the basic jurisdiction of the Additional Commissioner which was not the basic issue---First Appellate Authority had candidly adjudicated the appeal and recorded its detailed finding on the legal and factual issues raised by the taxpayer relevant to doctrine of merger, change of opinion, definite information and non-attraction of Ss.153(6) and 169 of the Income Tax Ordinance, 2001, the non-applicability of word "deducted" to the taxpayer's receipts and vacated the orders being not sustainable under the law---Order of First Appellate Authority was not suffering from any flaw/lacuna and the same was maintained by the Appellate Tribunal.

??????????? 2011 PTD (Trib.) 1807; 2002 PTD 2379; 2005 PTD 344 (Trib.); 2009 SCMR 1279 = 2009 PTD 1392; 2001 PTD 932 (SC); 2004 PTD 2087 (Trib.); 2002 PTD 1014; 1992 PTD 751; 1990 PTD 338; 1996 PTD 186; 2004 PTD 583 (Trib.) and 2002 PTD 2379 rel.

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

----Ss.183, 205, 124, 162, 121, 122(5A), 122A, 122B & 120---Penalty for non-payment of tax---Default surcharge---Deletion of penalty and default surcharge by the First Appellate Authority---Revenue contended that taxpayer failed to substantiate its claim of refund due; and penalty and additional tax was rightly charged---Validity---First Appellate Authority vacated the order with the observation that "no legal demand was created under S.121, 122(5A), 122A or 122B of the Income Tax Ordinance, 2001 to undo the effects of order under S.120 of the Income Tax Ordinance, 2001; and if it was presumed for academic sake that the demand was payable by the taxpayer, even then the taxpayer had prepayments to its credit; and even during intervening period i.e. date of order under S.162 of the Income Tax Ordinance, 2001 to date of setting aside by the Appellate Tribunal, neither default surcharge nor penalty was imposable---When taxpayer had discharged its legal liability by filing return of income and paid due tax , then the order gained finality; and it was neither hit by disability of S.120(3) of the Income Tax Ordinance, 2001, not amended under S.122(5A) of the Income Tax Ordinance, 2001---Additional tax or penalties were not payable due to clear cut stipulation of S.161(1B) and S.162(2) of the Income Tax Ordinance, 2001---As legal demand had not been created, the credit/refund of taxes paid could only be given to order under S.120(1) of the Income Tax Ordinance, 2001 and was ordered accordingly---Due to inbuilt infirmities and contradictions in order under Ss.205/124, 183(1)(a) and 183(1)(b) of the Income Tax Ordinance, 2001, these were void ab initio in law and facts and could not be sustained in law and were vacated"---Appellate Tribunal did not interfere the order of First Appellate Authority as the same had rightly been vacated---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeals filed by the department were dismissed.

??????????? 1981 PTD 169 and 1998 PTD (Trib.) 1945 rel.

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

----S.205 (1A)---Default surcharge---Quashment of base year---First Appellate Authority observed that "Taxation Officer had imposed tax under a wrong premises of law, as the base years upon which additional tax was based was quashed by the Appellate Tribunal and the demand created had no locus standi; and it was illegal and could not be sustained in law and was vacated"---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeal filed by the department was dismissed.

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

----S.182(2)---Exemption from penalty and default surcharge---Revenue contended that First Appellate Authority was not justified to delete penalty under S.182(2) of the Income Tax Ordinance, 2001 as the taxpayer had not filed annual e-statement of employees---First Appellate Authority observed that "e-statement for both the years had been filed and taxpayer had replied to the show cause notice as per copy received at the facilitation centre and it was duly stamped; and there was no default for non filing of e-statements nor non compliance of notice under S.190(1) of the Income Tax Ordinance, 2001; and there was no justification for imposition of penalties and were vacated"---No interference was made by the Appellate Tribunal and order of First Appellate Authority was upheld and appeals filed by the department were dismissed.

??????????? Muhammad Tahir Khan, DR for Appellant.

??????????? Kaleem Ashraf, ACA for Respondent.

??????????? Date of hearing: 10th January, 2013.

2013 P T D (Trib.) 951

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

Messrs NOORANI STEEL, Proprietor Muhammad Jamshed Khalid, Lahore

Versus

C.I.R., ZONE-IV, R.T.O., LAHORE

S.T.A. No.1200/LB of 2012, decided on 26th February, 2013.

Sales Tax Act (VII of 1990)---

----Ss.21(2) & 37---De-registration, blacklisting and suspension of registration---Proceedings under S.37 of the Sales Tax Act, 1990 were initiated calling upon the registered person to show cause as to why his registration should not be cancelled and blacklisted---Registered person was blacklisted with immediate effect---Contention of registered person was that blacklisting had followed the suspension of its registration which was subject matter of an appeal before Appellate Tribunal, whereby the suspension order and subsequent proceedings were set aside, thus, blacklisting order was illegal---Validity---Edifice built upon unlawful foundations had to crumble down---Appellate Tribunal had already declared the suspension of registration as unlawful---Blacklisting having been done pursuant to the suspension of registration was to meet its fate of cancellation and Appellate Tribunal ordered so---Appeal of the registered person was accepted by the Appellate Tribunal.

Miss Nida Malik, ITP for Appellant.

Ms. Fauzia Fakhar, DR for Respondent.

Date of hearing: 25th February, 2013.

2013 P T D (Trib.) 954

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Muhammad Akram Tahir, Accountant Member

Messrs DECENT TEXTILES, FAISALABAD

Versus

COMMISSIONER (APPEALS) INLAND REVENUE (R.T.O.), FAISALABAD and another

S.T.As. Nos.1020/LB to 1026/LB of 2012, decided on 7th March, 2013.

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

----Ss.11, 10, 8, 7, 4, 2(14), 2(37), 23, 25, 26, 33, 34, 36 & 72B---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Post refund audit---Huge refund of sales tax had been received by registered person against packing materials which were neither consumed in zero-rated supplies nor had been shown in closing stocks of relevant tax periods---Assessing Officer, being dissatisfied with the explanation, directed the taxpayer to pay sales tax along with penalty and default surcharge---Registered person contended that post audit exercise conducted by the Deputy Commissioner Inland Revenue under S.25 of the Sales Tax Act, 1990 without prior selection by the Federal Board of Revenue under S.72B of the Sales Tax Act, 1990 was illegal and without jurisdiction---Validity---Section 72B of the Sales Tax Act, 1990 mandatorily provided that before conducting an audit of tax affairs , selection must be made by the Federal Board of Revenue---Deputy Commissioner Inland Revenue had conducted audit of sales tax records under S.25 of the Sales Tax Act, 1990 on its own will without any prior selection from the Federal Board of Revenue on the basis of random or parametric criteria under S.72B of the Sales Tax Act, 1990 which was illegal and without jurisdiction---Where the basic statutory notice was illegal and without lawful authority, the whole superstructure built on the same would fall on the ground automatically and whatsoever proceedings in its consequences in the shape of any show cause notice or adjudication order or appellate order or even recovery notice shall also become illegal, unlawful and without jurisdiction---Action without selection of case for audit was wholly illegal, without jurisdiction and also utter violation of mandatory provisions of law as the tax functionaries assigned themselves with a jurisdiction not vested in them in the statute book and if it desired to cross the same it would amount to transgress their legal jurisdiction and would equivalent to abuse their powers---Post refund audit exercise had been carried out by the Deputy Commissioner Inland Revenue not only without prior selection by the Federal Board of Revenue under S.72B of the Sales Tax Act, 1990 but also without lawful notice for requisition of sales tax record under S.25(1) of the Sales Tax Act, 1990 and proper authorization of Commissioner for audit under S.25(2) of the Sales Tax Act, 1990---Whole audit exercise was illegal, unlawful and without legal jurisdiction and the consequent show cause notice and adjudication and appellate order was also illegal, ab initio void and without jurisdiction which were set aside by the Appellate Tribunal---Appeals filed by the taxpayer were accepted.

2012 PTD 1815; GST 2003 CL 598; S.T.A. No.297/LB of 2012 and Director Directorate-General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. 2006 SCMR 129 rel.

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

----Ss.72B & 25---Selection for audit by Federal Board of Revenue---Due process of Law---Provisions regarding selection of audit by the Federal Board of Revenue were made mandatory w.e.f. 1st July, 2010---Any audit exercise conducted thereafter, without adhering to due process of law by subordinate tax functionaries without selection of audit by the Board was not only illegal and unlawful but also without lawful competency and legal jurisdiction---Any exercise for audit of tax affairs of a registered person under S.25 of the Sales Tax Act, 1990 without adhering to due process of S.72B of the Sales Tax Act, 1990 would tantamount to dire violation and flagrant deviation from the doctrine of "Due process of Law".

(c) Administration of justice---

----Due process of Law---Any exercise conducted without due process of law was illegal, unlawful and without jurisdiction.

(d) Administration of justice---

----When the legislature requires the doing of a thing in a particular manner then it is to be done in that manner and all other manners or modes of doing or performing that thing are barred.

Director Directorate-General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. 2006 SCMR 129 rel.

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

----S.25 (1)---Access to record, documents, etc.---Requisition of record by the Deputy Commissioner Inland Revenue---Jurisdiction---Notice issued by the Deputy Commissioner Inland Revenue for demanding sales tax record for post refund audit under S.25(1) of the Sales Tax Act, 1990 was illegal and without lawful jurisdiction as it was the Commissioner who could issue such kind of notice for requisitioning sales tax records under S.25(1) of the Sales Tax Act, 1990 for the purposes of post refund audit---Deputy Commissioner Inland Revenue requisitioned sales tax records for audit by exercising the powers of Commissioner not otherwise bestowing on him under the provisions of S.25(1) of the Sales Tax Act, 1990---Deputy Commissioner Inland Revenue had transgressed his powers by issuing notices for requisitioning the sales tax records under S.25(1) of the Sales Tax Act, 1990 was patently illegal and void ab initio as it was the Commissioner Inland Revenue who was legally competent to issue such notices requiring a taxpayer to produce any sales tax record for the purpose of audit.

(f) Administration of justice---

----Power vested in any authority can only be exercised by that authority, in default whereof, the entire action would be without jurisdiction, void ab initio and of no legal effect and any subsequent action in continuation of these proceedings in adjudication or appeal shall also equally suffer from illegality and would be without jurisdiction.

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

----S.25 (2)---Access to record, documents, etc.---Conduct of audit by the Deputy Commissioner Inland Revenue without authorization by the Commissioner Inland Revenue---Validity---Deputy Commissioner Inland Revenue had transgressed his powers by issuing notices for requisitioning the sales tax records under S.25(1) of the Sales Tax Act, 1990 without any proper and due authorization by the Commissioner Inland Revenue---Provisions of S.25(2) of the Sales Tax Act, 1990 clearly revealed that the officer of Inland Revenue authorized by the Commissioner, on the basis of record, obtained under subsection (1), may, once in a year, conduct audit---No doubt that Deputy Commissioner Inland Revenue could conduct audit of sales tax record of a taxpayer but after due process of authorization by the competent authority and in the absence of any such authorization by the Commissioner under S.25(2) of the Sales Tax Act, 1990 the whole exercise carried out by the Deputy Commissioner Inland Revenue was illegal, ab initio void and without jurisdiction---Each authority working under the hierarchy of the Inland Revenue Department had been assigned a specific job to perform his duty and to exercise jurisdiction within the parameters as specifically provided under the law---Any transgression to his authority and powers vested in the statute book would render the entire exercise of authority illegal and void ab initio---Deputy Commissioner had transgressed his jurisdiction by conducting audit exercise without prior approval and authority of the Commissioner Inland Revenue under S.25(2) of the Sales Tax Act, 1990.

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

----Ss. 10(1) & 7(1)---Refund of input tax---Refund payable on the basis of consumption of material---Validity---Sales tax refund was payable on the basis of goods purchased or imported during a tax period---Question of its consumption in the same tax period was practically implausible and unreasonable---Issue was basically misinterpreted and mis-construed by the Assistant Commissioner Inland Revenue and was framed in defiance of general scheme of input tax adjustment, credit or refund thereof under S.7(1) of the Sales Tax Act, 1990 and S.10(1) read with the Refund Rules made there-under---Allowance of adjustment of input tax under S.7(1) of if its refund accrued due to zero-rated local supplies or exports under S.10(1) of the Sales Tax Act, 1990 was made subject to consumption of input goods in that very tax period was equivalent to defiance and defeating the general scheme of sales tax embodied in the Sales Tax Act, 1990---Registered person was entitled to deduct input tax paid or payable during a tax period for the purpose of taxable supplies made or to be made by him from output tax under S.7(1) of the Sales Tax Act, 1990 and in case, input tax credit exceeds output tax due to zero-rated local supplies or exports thereof, its refund was made available under S.10(1) of the Sales Tax Act, 1990---None of the provisions of S.7(1) of the Sales Tax Act, 1990 or S.10(1) of the Sales Tax Act, 1990 or even the rules made thereunder provided for input credit/refund on the basis of consumption instead it was on basis of purchases and imports---If input tax incurred on purchases or imports exceeded output tax due to zero-rated local supplies or exports thereof, excess amount shall be refunded to registered person under S.10(1) of the Sales Tax Act, 1990.

GST 2003 CL 598 and S.T.A. No.297/LB of 2012 rel.

(i) Interpretation of statutes---

----Taxing statute should be strictly construed and where there are more than one possible interpretations to the provision of fiscal statute, the interpretation which is most favourable to the taxpayer shall be preferred to be given effect to.

Khubaib Ahmad for Appellant.

Mrs. Sadia Sadaf, D.R. for Respondent.

Date of hearing: 7th March, 2013.

2013 P T D (Trib.) 965

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

Messrs NASEEM PLASTIC HOUSE, FAISALABAD

Versus

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

M.A. Stay No.935/LB of 2012 in S.T.A. No.960/LB of 2012, decided on 17th October, 2012.

Sales Tax Act (VII of 1990)---

----Ss. 21 & 46---De-registration blacklisting and suspension of registration---Scope---Registration was suspended with effect from the date of its registration till further order---Pray for issuance of restraint order in respect of such suspension order on the ground that whole exercise of suspension of registration of petitioner suffered from legal as well factual infirmities and improprieties which warranted suspension of the order separately---Validity---Fact that the suspension order was subjudice before the Appellate Tribunal was not denied---Appellate Tribunal, in circumstances, ordered for stay of suspension of said order for a period of 30 days or the decision in the main appeal whichever was earlier.

Khubaib Ahmad for Applicant.

Shahid Safdar, DR for Respondent.

Date of hearing: 17th October, 2012.

2013 P T D (Trib.) 966

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Akram Tahir, Accountant Member

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

Versus

Messrs IHSAN YOUSAF TEXTILES (PVT.) LTD., FAISALABAD

S.T.A. No.349/LB of 2011, decided on 7th February, 2013.

Sales Tax Act (VII of 1990)---

----Ss.21(3), 8A, 33, 34, 36 & 73---De-registration, blacklisting and suspension of registration---Post refund audit---Registered person had received inadmissible refund against invoices of certain suppliers whose registrations were either suspended/cancelled or were declared blacklisted---Notice for recovery of such sales tax amount along with default surcharge and penalty with direction to pay the sales tax along with default surcharge and penalty equal to 100%---Registered person contended that he had not committed any default in making business transactions as the suppliers at the relevant time were active and alive registered person produced the purchase record to prove the physical transfer of goods and proof of payments---Registered person further contended that after insertion of subsection (3) of S.21 of the Sales Tax Act, 1990 by Finance Act, 2011 input tax shall be allowed if payments were made through banking channel---Validity---First Appellate Authority had allowed refund on the basis of orders of the Appellate Tribunal wherein it had been held that input tax credit against invoices of such blacklisted person 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 shall be allowed if payments were made through banking channel irrespective of the fact that the supplier units were either blacklisted or their registration had been suspended and Revenue had not been able to point out any legal flaw therein---No interference, in circumstances, in the order was warranted---Departmental appeal was rejected by the Appellate Tribunal.

2005 SCMR 492; S.T.A. No.1415/LB of 2008; S.T.A. No.1393/LB of 2008 and S.T.A. No.1334/LB of 2009 ref.

2012 PTD (Trib.) 453 rel.

Sajjad Tasleem DR for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 7th February, 2013.

2013 P T D 1001

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti Chairperson and Sohail Afzal, Accountant Member

CENTRAL POWER GENERATION COMPANY LIMITED GUUDU, DISTRICT KASHMORE

Versus

COMMISSIONER INLAND REVENUE ZONE-I, RTO, LAHORE

S.T.As. Nos. 883/LB to 886/LB of 2012, decided on 9th January, 2013.

Sales Tax Act (VII of 1990)---

----Ss.36, 7, 33(13) & 73---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Income from production and sale of electricity---Credit of input tax claimed by the registered person was disallowed on account of capacity purchase price---Taxpayer contended that case was decided on the facts which were not confronted through show-cause notice and order of Assessing Officer was beyond the show-cause notice and was not maintainable; that show cause notices were issued on the basis of income tax record which was not permissible under the law; that order had been passed for July, 2008 to June, 2009 and July, 2009 to June, 2010 whereas in the show-cause notices tax years 2009 and 2010 were confronted; that liability had been determined on the ground that taxpayer had not enjoyed exemption on account of capacity purchase price; and that if the contention of the department was accepted then it would be a case of misconstruction/error falling under S.36(2) of the Sales Tax Act, 1990 which had not been invoked and order was not maintainable in the eye of law which was liable to be cancelled---Revenue contended that input tax had rightly been disallowed and exemption claimed on account of capacity purchase price had rightly been disallowed as registered person could not substantiate his claim---Validity---Contentions made by the taxpayer were forceful---Orders-in-original were passed beyond the show-cause notice and beyond the pecuniary jurisdiction which were without jurisdiction and were set aside by the Appellate Tribunal.

1987 SCMR 1840; 2010 PTD 451; 2011 PTD 1883; 2011 PTD 2538; 2012 PTD (Trib.) 105; S.T.A. No 849/LB/2011 dated 9-4-2012; S.T.A. No. 530/LB of 2011; S.T.A. No. 578/LB/2011; 2011 PTD 467, 2011 PTD (Trib.) 1943; S.T.A. No 42/LB/2011 dated 4-5-2012; S.T.A. No 55/LB/2012 dated 6-4-2012; S.T.A. No 823/LB of 2011 dated 8-6-2012; 2009 PTD (Trib.) 1069 and 2010 PTD (Trib.) 1174 ref.

M. Iqbal Hashmi and Qadeer Ahmed for Appellants.

Miss Ayesha Imran Butt, D.R. for Respondent.

Date of hearing: 19th December, 2012.

2013 P T D (Trib.) 1056

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javed Iqbal, Judicial Member and Mian Masood Ahmed, Accountant Member

C.I.R. (LEGAL) ZONE-I, R.T.O., PESHAWAR

Versus

Messrs GADOON TEXTILE MILLS

I.T.As. Nos. 208 and 241(PB) of 2011, decided on 1st December, 2011.

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

----Third Sched, R.1(3A), Ss.22, 23, 24, 25 & 62---Income Tax Ordinance (XLIX of 2001), Ss.124 & 221---C.B.R. Circular No.23 of 1988 dated 8-11-1988---Computation of depreciation allowance---Un-absorbed depreciation of tax holiday---First Appellate Authority annulled the assessment and directed that un-absorbed depreciation of tax holiday period be adjusted against the income/profits and gains of post holiday period---Revenue contended that in case of exemption to industrial undertaking under various clauses to the Second Schedule to the Income Tax Ordinance, 1979, the profits and gains were chargeable to tax but exempted from taxation as concession and for the incentive and for betterment of economic activity of the country thus there arose no question to keep in abeyance the depreciation till the post holiday period---Taxpayer contended that profit and gains of the units were not chargeable to tax in the tax holiday period at all; that the return showing nil income was filed, no proper assessment had been made in each of the year of exemption, rather nil income was assessed; that depreciation was held in abeyance till the expiry of tax holiday period, and had been claimed in the post tax holiday period as unabsorbed depreciation, which was as per rules and in accordance with law, because at that time no such R. 3(A) was on the statute book; that unabsorbed depreciation was to be carried forward accordingly and be adjusted against the taxable profits and gains of the post tax holiday period; and that order passed under S.124 of the Income Tax Ordinance, 2001 was illegal and also hit by limitation---Validity---Work carried out by the Taxation Officer was not correct, it was only normal depreciation which was to be accounted for---Prior to insertion of R.1(3A) of Third Schedule to the Income Tax Ordinance, 2001, normal depreciation was deducible from the original cost of the assets in post tax holiday period---After the amendment in rule it was the written down value which was to be carried forward to the post tax holiday period and normal depreciation was deemed to have been allowed in the exempt period---Only the business income against which depreciation was to be adjusted and not against any other source of income---In case of exempt income assessment was to be framed in proper manner as contained in Ss.22 to 25 of the Income Tax Ordinance, 1979, such exercise had not been carried out---Either the nil income had been assessed or the declared version should have been accepted without any probe of income in the entire years of exemption---In the tax holiday no proper assessment had been framed, either the nil return had been assessed or declared version had not been probed, while it could not be so remanded to assessing authority because of the fact that years involved 1992-93 to 2000-2001 neither were the subject of appeals nor could be probed due to bar of limitation.

94 Tax 65 and (1999) 79 Tax 115 ref.

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

----S.156---Rectification of mistake---Rejection of application asking rectification on the identical grounds which had been agitated in appeal and rectification asked was of such a nature which could be termed the review or revision of the order---Validity---Order passed by the First Appellate Authority refusing the rectification was quite justified because the relief asked was of such a nature which fell outside the mandate of S 156 of the Income Tax Ordinance, 1979 which fact was also evident from identical grounds in the departmental appeals, which alone was sufficient for rejection of appeal---Appellate authority was mandated to adjudge the matter, passing of any rectified order by the same authority who had passed the order sought to be rectified would amount an appellate order, while one could not sit as a judge to give the adjudication as an appellate authority against its own order---No mistake or illegality or infirmity was noticed and there was no reason to disapprove the impugned conclusion being in accordance with law---Conclusion was confirmed and departmental appeal being infructuous and devoid of merits stood rejected.

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

----S.124---Income Tax Ordinance (XXXI of 1979), S.66(1)---Assess-ment giving effect to an order---Remand of case---Re-assessment---Limitation---Period of limitation of one year after the end of the financial year in which the appellate order served on the Commissioner had been prescribed in the Income Tax Ordinance, 1979, also as per S.124 of the Income Tax Ordinance, 2001 same period of limitation had been prescribed in case of remand to reframe the assessment---Taxation Officer had passed the order on 16-5-2011,whereas the appellate order had been served on department on 10-2-2009---Under the provision of S.66(1) of the Income Tax Ordinance, 1979 period of limitation expired on 30-6-2010, while the order by the Taxation Officer had been passed on 21-5-2011, which was barred by limitation---Further, appellate order dated 10-1-2009 served on 10-2-2009, no appeal had been filed by the department before Appellate Tribunal ;and order attained finality in the circumstances where the order passed by the Taxation Officer dated 16-5-2011 was barred by limitation, while no appeal had been filed by the department in such like situation and what had been declared by the assessee was to be accepted which had been directed by the First Appellate Authority---Departmental appeal failed and stood rejected by the Appellate Tribunal.

Mir Badshah Wazir and Mir Alam Khan, L/DRs for Appellants.

Khaliq-ur-Rahman, FCA with Abdul Sattar Jomani for Respondents.

Date of hearing: 23rd November, 2011.

2013 P T D (Trib.) 1070

[Inland Revenue Appellate Tribunal of Pakistan]

Before Zafar Iqbal, Judicial Member and Mrs. Zareen Saleem Ansari, Accountant Member

Messrs HABIBULLAH COASTAL POWER (PVT.) LIMITED, QUETTA

Versus

COMMISSIONER OF INCOME TAX, QUETTA

I.T.As. Nos.1077/KB to 1079/KB of 1998-99, decided on 29th September, 2010.

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

----S. 52---Liability of persons failing to deduct or pay tax---Rate of tax---Contention of Revenue was that deduction of tax for turnkey power projects should be at 8% and not 4% in respect of a contract was incorrect---ECC directive as accepted by the Federal Board of Revenue had already settled the issue with regard to such contract---Contention of the taxpayer seemed to be correct in submitting that Revenue was unnecessarily reopening a dispute which had been long settled.

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

----S. 52---Liability of persons failing to deduct or pay tax---Jurisdiction of Assessing Officer of the recipient or the payer---Where original assessment was framed on 15-9-1998 the operative judgment which held the field was 1999 PTD 4037 in terms whereof the jurisdiction under S.52 of the Income Tax Ordinance, 1979 only vested with the Assessing Officer of the recipient and not the payer---Assessments were framed by the Assessing Officer of the assessee/payer whereas for the purposes of S.52 of the Income Tax Ordinance, 1979, before amendment, the jurisdiction vested with the Assessing Officer of the recipient---All original assessment orders dated 15-9-1998 were void---Section 52 of the Income Tax Ordinance, 1979 was amended by Finance Act, 1999, which was only effective from 1-7-1999---Amendment was in the shape of an explanation to S.52 of the Income Tax Ordinance, 1979 which was noted by the High Court in a case reported as 2001 PTD 570 in which, by majority of two against one, it was held that after the amendment by Finance Act, 1999 for the purposes of S.52 of the Income Tax Ordinance, 1979, the jurisdiction to treat a person as an assessee in default lay with the Assessing Officer of the payer and not the recipient---Amendment to S.52 of the Income Tax Ordinance, 1979 was retrospective in nature, but this only meant that on 1-7-1999 (i.e. the date on which S.52 of the Income Tax Ordinance, 1979 was amended by Finance Act, 1999) if the assessments were not framed for the years prior to the Finance Act, 1999, S.52 of the Income Tax Ordinance, 1979 would be applicable to even those prior years---Judgment reported as 2001 PTD 570 did not lay down that the amendment made by Finance Act, 1999 to S.52 of the Income Tax Ordinance, 1979 would also apply to a transaction which was past and closed i.e. where the assessments had already been framed before the advent of the Finance Act, 1999---At the time when assessments were framed on 15-9-1998 admittedly, the jurisdiction as per reported judgment 1999 PTD 4037 vested with the Assessing Officer of the recipient and not the payer---Assessment orders were all without jurisdiction.

Tapal Energy v. Federation of Pakistan 1999 PTD 4037; Continental Chemical v. Pakistan 2001 PTD 570; 1983 CLC 1585; 1988 SCMR 715; 1993 SCMR 1905; 1986 SCMR 96 and 2005 PTD 259 rel.

(c) Interpretation of statutes---

----Procedural and jurisdictional amendments are retrospective in nature, unless and until a statute specifically and expressly specifies so, the procedural/jurisdictional amendment will not apply to transactions which are past and closed.

1983 CLC 1585; 1988 SCMR 715; 1993 SCMR 1905; 1986 SCMR 96 and 2005 PTD 259 rel.

(d) Income Tax---

----Jurisdiction---Jurisdictional defect cannot be cured by any amendment in law, especially where the amendment does not specifically and expressly cure the jurisdictional defect.

AIR 1961 SC 1425; AIR 1967 SC 651; AIR 1962 SC 1621 and AIR 1968 SC 1336 rel.

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

----Ss. 50(4) & 52---Deduction of tax at source---Liability of persons failing to deduct or pay tax---Amendment by Finance Act, 1999, through an explanation to S.52 of the Income Tax Ordinance, 1979, did not specifically say that same will cure the jurisdictional defect in any assessment orders which had already been passed---Amendment made by the Finance Act, 1999 being not applicable to the assessment orders, dated 15-9-1998, they were nullity in the eye of law---All payments were made prior to 1-7-1998 and at the time of making payments S.50(4) of the Income Tax Ordinance, 1979 did not require any tax to be deducted at source in respect of non-resident---Recipient was admittedly a non-resident and there was nothing in the statute which required deduction of tax at source in respect of non-residents---Proviso to S.50(4)(a) of the Income Tax Ordinance, 1979, which mandated the deduction of tax at source for the non-residents, was inserted on 1-7-1998, while all payments were made by the assessee before this date and there was no obligation on the part of assessee to have deducted income tax at source.

2001 PTD (Trib.) 1816 rel.

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

----S.8---Income Tax Ordinance (XLIX of 2001), S.214---All Officers to follow the orders of the Federal Board of Revenue---Contention of the department that tax @ 8% was not deducted was misconceived in view of the fact that said matter had been settled through the directions of the Economic Co-ordination Committee and the Federal Board of Revenue---Indeed orders of the Federal Board of Revenue were binding on all its officers as per S.8 of the Income Tax Ordinance, 1979 and S.214 of the Income Tax Ordinance, 2001.

Muhammad Naseem for Appellant.

Ayaz Mehmood, D.R. for Respondent.

Date of hearing: 1st September, 2010.

2013 P T D (Trib.) 1083

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

BANK AL-HABIB LIMITED, MULTAN

Versus

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

I.T.As. Nos.914/LB to 916/LB, 1121/LB to 1123/LB of 2009, 893/LB, 1052/LB to 1054/LB, 1090/LB to 1092/LB, 930/LB, of 2010, 3292/LB of 2004, 1328/LB, 5510/LB, 7141/LB, 7142/LB of 2005, M.A. No.146/LB of 2011 and M.A. (Con.) No.1/LB of 2012, decided on 7th January, 2013.

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

----S. 122---Amendment of assessment---Assessment years 1999-2000 & 2000-2001---First Appellate Authority annulled the orders by holding that S.122 of the Income Tax Ordinance, 2001 could not be invoked in respect of any order passed prior to 1-7-2003---Held, S. 122 of the Income Tax Ordinance, 2001 had no application for any year prior to tax year 2003---Departmental appeal was dismissed by the Appellate Tribunal.

CIT v. Eli Lilly Pakistan (Pvt.) and others 2009 SCMR 1279 = 2009 PTD 1392 rel.

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

----S.122 (5A)---Amendment of assessment---Assumption of jurisdiction by the Additional Commissioner---Validity---All appeals of the assessee were dismissed on the issue and allowed that of Department---Principles.

Writ Petition No.2412 of 2009, dated 27-4-2012; 2010 PTD 705 (Trib.); ITA No.625/IB of 2010, dated 16-3-2012 and I.T.As. Nos.691 to 694/LB of 2011, dated 26-3-2012 ref.

2013 PTD (Trib.) 246 rel.

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

----S.122(5)---Amendment of assessment---Definite information---Pre-requisite for invoking S.122(5) of the Income Tax Ordinance, 2001 was definite information with regard to escapement or under-assessment of income or assessment at too low a rate or subjection of excessive relief or refund---Definite information must have come in the possession of Department after completion of assessment.

CIT v. Eli Lilly Pakistan (Pvt.) and others 2009 SCMR 1279 = 2009 PTD 1392 and Central Insurance Co. and others v. CBR, Islamabad and others 1993 SCMR 1232 = 1993 PTD 766 rel.

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

----S.122(5)---Amendment of assessment---Definite information---In the presence of favorable judgments of higher courts on the issue the department could not invoke S.122(5) of the Income Tax Ordinance, 2001 as mere disagreement with the decisions of higher courts did not constitute definite information.

Saitax Spinning Mills Ltd. v. Commissioner of Income Tax 2003 PTD 808 rel.

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

----Ss. 122(5) & 67---Amendment of assessment---Mere disagreement over legal interpretation of S.67 of the Income Tax Ordinance, 2001 and estimation of life of computer software was not definite information as wrongly assumed by the Department---Invoking of S.122(5) of the Income Tax Ordinance, 2001 on the issues was unlawful.

Saitax Spinning Mills Ltd. v. Commissioner of Income Tax 2003 PTD 808 rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Assessee, a Bank---Expenses against income of Azad Kashmir branches---While passing order under Ss.62/135 of the Income Tax Ordinance, 1979 on the directions of Appellate Tribunal, the department taxed bank's global income but expenses relating to Azad Kashmir operations were not allowed---First Appellate Authority directed to allow such expenses---Since bank's global income, including income from Azad Kashmir operation, was taxed, there was no justification for not allowing expenses relating thereto---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

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

----Third Sched., Rr.5(1) & 5(2)(b)---Initial depreciation on building---Claim of initial depreciation on building was disallowed---Assessee, a Bank, contended that two requirements were that building should be newly erected within the specified dates and that it should be used for the first time for the purpose of taxpayer's business; that bank used the building for the first time in its business and building was newly erected by the seller in the period between 1-7-1976 to 30-6-2000; and in R.5(2)(b) of the Third Schedule of the Income Tax Ordinance, 1979, the legislature clearly mentioned that initial depreciation would not be available to "any machinery or plant which had previously been used in Pakistan"; that such negative condition was not extended to buildings meaning thereby that a taxpayer was entitled to initial depreciation even if he acquired a newly erected building from the owner but used it for its own business for the first time; that since no negative provision existed in respect of buildings that were previously used, such a taxpayer would not be disentitled for initial depreciation under R.5(1) of the Third Schedule of the Income Tax Ordinance, 1979; and that had it been the intention of legislature to restrict initial depreciation in the case of a building which had been previously used, it could have added it in the negative list provided in R.5(2) of the Third Schedule of the Income Tax Ordinance, 1979---First Appellate Authority allowed initial depreciation---Revenue contended that initial depreciation was rightly disallowed as the bank did not furnish any proof showing that the building was newly constructed and was not used by any one before coming into the ownership of the bank---Validity---Controversy was of legal nature as nowhere in the order the allegation of use of building, after its completion, by a person other than by a bank was mentioned---First Appellate Authority dealt with the issue comprehensively both on factual and legal ground; and there was no infirmity in the order of First Appellate Authority, which was confirmed by the Appellate Tribunal.

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

----S.124A---Powers of tax authorities to modify orders, etc.---Relief under S.124A of the Income Tax Ordinance, 2001---Assessee, a Bank, contended that in view of S.124A of the Income Tax Ordinance, 2001, the department should have followed the judgments on the issues---Revenue contended that legislature had used word "may" which gave option to Commissioner to invoke or not to invoke said section and that relief under S.124A of the Income Tax Ordinance, 2001 was directory and not mandatory---Validity---Section 124A of the Income Tax Ordinance, 2001 aimed at avoiding repetitive appeals on any legal issue on which Appellate Tribunal or High Court had already given a judgment in the case of a taxpayer---No discretion had been given to Commissioner, rather an obligation was imposed under the said section---Very purpose of insertion of the section had been to avoid repetitive order/appeals on an issue which was sub-judice before a court---Department despite clear verdict of Supreme Court of Pakistan on word "may" and remedy already provided by the legislature itself under S.124A(2) of the Income Tax Ordinance, 2001 had been repeating the same additions every year which were not maintainable in law---Right course for department was to implement S.124A of the Income Tax Ordinance, 2001 and get the orders reversed from the court where the matter was sub judice as remedy was available to the Department under S.124A(2) of the Income Tax Ordinance, 2001---Issue was decided in favour of the taxpayer by the Appellate Tribunal and against the department accordingly.

(2004) 90 Tax 116 (Trib.) ref.

Abu Bakar Siddique and others v. Collector of Customs 2004 PTD 2187 rel.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Assessee, a Bank---Provisions for non-performing loans---Bad debts, written off---Disallowance---First Appellate Authority observed that "there was no reason for disallowance of the claim of bad debts for the banks; that only criterion was adoption of rules fixed by the State Bank; and that if there was no deviation of the Prudential Bank Regulation, the claim of bad debt could not be disallowed and that since it was not the case of the department that there was deviation, the claim of bad debts of the bank were allowed in full"---Appellate Tribunal decided the issue in favour of banks---All the departmental appeals failed and that of taxpayer succeeded. [pp. 1102, 1103] L & M

I.T.A. No.565 of 2000 dated 1-3-2006 I.T.R. 291 of 2008 dated 13-10-2010 ref.

2012 PTD (Trib.) 1139 rel.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Assessee, a Bank---Bad debts against provisions---Bank claimed deduction of bad debts against provision for tax years 2003 and 2004 as provisions for bad debt were disallowed in earlier years---Addition was deleted by the First Appellate Authority---Revenue contended that provisions for bad debts had already been allowed in appeal---Validity---When provision for bad debts had been allowed, there was no justification for claiming write-offs made through provision unless these were direct right offs not routed through provisions---Additions were confirmed by the Appellate Tribunal with observation that if at any later stage provision was disallowed by any order of the higher court, present actual write offs should be allowed.

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

----Ss.67 & 124A---Apportionment of deductions---Assessee, a Bank---Allocation of expenses against dividend, exempt capital gain and Ijara financing income---Department disallowed expenses by allocating expenses to dividend, exempt capital gain and to ijara income---First Appellate Authority disapproved such allocation with the observation that this issue had already been decided by the Appellate Tribunal in favour of taxpayer---Validity---Section 124A of the Income Tax Ordinance, 2001 revealed that said section was aimed at avoiding repetitive appeals on any legal issue on which Appellate Tribunal or High Court had already given a judgment in the case of a taxpayer---No discretion had been given to Commissioner, rather an obligation was imposed---Very purpose of insertion of said section was to avoid repetitive order/appeals on an issue which was sub-judice before a court---Department despite clear remedy provided by the legislature itself under S.124A of the Income Tax Ordinance, 2001 had been repeating the same additions which was not maintainable in the law---Right course for the department was to apply S.124A of the Income Tax Ordinance, 2001 and get the orders reversed from the court where the matter was presently sub-judice---Issue was decided in favour of the taxpayer and against the department.

(2004) 90 Tax 116 (Trib.) rel.

2005 PTD 2161 (Trib.) and 2005 PTD 2599 distinguished.

(2004) 90 Tax 116 (Trib.); 2006 PTD 2678; 1993 PTD (Trib.) 472; (2006) PTD (Trib.) 1292; 2006 PTD (Trib.) 356 and 2005 PTD (Trib.) 2041 ref.

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

----S. 61---Charitable donations---Assessee-Bank claimed tax credit of donation---Department curtailed same by allocating donation to exempt income---Such allocation was confirmed by the First Appellate Authority on the ground that taxpayer's income was being bifurcated under three heads, exempt income, presumptive tax regime income and Normal Tax Regime income, thus an expense could not be attributed to a particular mode of income---Taxpayer contended that it was not an expense attributable to exempt income as wrongly assumed---Validity---Such was not an expense attributable to exempt income but was a credit admissible under the law. [pp. 1104, 1105] Q & R

CIT v. Azlak Enterprises (Pvt.) Ltd., Karachi 2003 PTD 1309 rel.

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

----S.21(k)---Deductions not allowed---Assessee, a Bank---Excess perquisites---Amounts under the heads; "entertainment"; "conveyance"; "travelling fare"; "staff training"; "staff refreshment" and "staff uniform" were treated as perquisites and added in income---Taxpayer contended that these expenses were incurred wholly and exclusively in relation to performing of duties by the employees and by no stretch of imagination could be construed as allowance, perquisites or benefit within the meaning of S.21(k) of the Income Tax Ordinance, 2001---First Appellate Authority observed that on same grounds additions made were set aside and department accepted bank's point of view and did not make any addition---Validity---Expenses were not allowances, perquisites or benefits within the meaning of S.21(k) of the Income Tax Ordinance, 2001---No infirmity in the order of First Appellate Authority having been found its order was confirmed by the Appellate Tribunal.

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

----Ss.21(k) & 13(7)---Deductions not allowed---Assessee, a Bank---Concessional loans---Addition was made by treating concessionary loans as excess perquisites---Addition was deleted by the First Appellate Authority in the light of decision of Appellate Tribunal---Revenue contended that in Income Tax Ordinance, 1979 no parallel provision was available, but in Income Tax Ordinance, 2001, S.13(7) brings such loans within the purview of taxation---Validity---Contention of revenue was not valid as S.13(7) of the Income Tax Ordinance, 2001 dealt with income in the hands of employees, whereas the issue in the present case was treatment of concessional loans in the hands of employers---Bank did not claim any expenses, the issue of disallowance would not arise---Departmental appeal was dismissed on the issue.

2006 PTD (Trib.) 356 and I.T.R. No. 90 of 1983 dated 12-1-2007 rel.

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

----S.24(3)---Intangibles---Assessee, a Bank---Amortization of computer software was claimed in two years---Life of such computer software was adopted as five years---First Appellate Authority restricted amortization to three years---Taxpayer contended that S.24(3) of the Income Tax Ordinance, 2001 used the term "normal useful life in whole years" ; and in the present world technological advances were so fast that even such a program became outdated within one year---Revenue contended that intangible asset was rightly amortization to ten years---Validity---Technological advances were very fast---Amortization of computer software in five years was unjust---First Appellate Authority had restricted same it to three years which was reasonable---Order of First Appellate Authority was confirmed by the Appellate Tribunal.

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

----Third Sched:---Depreciation---Assessee, a Bank---Department disallowed 50% depreciation and travelling and motor vehicle expenses on vehicles used by directors and executives for their personal use on the ground that vehicles to that extent were used for deriving income of business---First Appellate Authority reduced the disallowance in the light of judgment of Appellate Tribunal---Validity---Vehicles were provided to employees in terms and conditions of the service---If vehicle were used by the employees partly for their personal use, addition could have been made in employees cases under Income Tax Rules and not in taxpayer's case---Additions were deleted by the Appellate Tribunal by following earlier judgments.

2005 PTD (Trib.) 2041; I.T.As. Nos.36 to 38/LB of 2003 dated 25-10-2003; I.T.As. Nos. 23 to 25/LB of 2003 dated 13-12-2003 and 2013 PTD (Trib.) 246 rel.

1984 PTD 4 distinguished.

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

----S.20---Deductions in computing income chargeable under the head "Income from Business"---Assessee, a Bank---Renovation/improvement of lease-hold premises---Expenses for publicity of opening of new branches---Such expenses was disallowed treating them as capital in nature---Addition was deleted by the First Appellate Authority for tax year 2003; and upheld by his successor for tax years 2005 to 2008---Contention was that expenses were incurred on branches where buildings were not owned by the Bank and expenses incurred on renovation and improvements of properties not owned by the bank were revenue in nature---Following earlier judgment, Appellate Tribunal decided the issue in favour of the Bank.

I.T.A. No.93/LB o 2001 dated 14-6-2002 rel.

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

----S.32---Banking Companies Ordinance (LVII of 1962), Ss.35 & 91---State Bank of Pakistan Act (XXXIII of 1956), Ss.46B & 54A---Method of accounting---Diminution in value of investment---Impairment loss---Taxpayer (Bank) contended that such provisions were made as per Prudential Regulations of State Bank of Pakistan which override income tax law; that such Prudential Regulations were issued by the State Bank of Pakistan in pursuance of powers vested in it under a special law; and banks were bound to prepare their accounts according to International Accounting Standards and Regulations issued by the State Bank; that accounts represent their regularly employed method of accounting as envisaged in S.32 of the Income Tax Ordinance, 1979; that department could not reject said method; that department did not show any flaw in the method of accounting; and that there was no prohibition in income tax law not to record closing stock at lower of cost or market price---Validity---Addition was upheld by the Appellate Tribunal with the direction that the department must allow impairment loss, if any, at the time of actual sale.

2010 PTD (Trib.) 679 distinguished.

2006 PTD 354; 2002 PTD 925; (2000) 81 Tax 265; (2002) 85 Tax 245; I.T.A. No.3819/LB of 1997 dated 7-12-1999; I.T.A. No.400/LB of 2000 dated 10-12-2001; 2012 PTD (Trib.) 1055 and 2013 PTD (Trib.) 246 distinguished.

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

----Ss.39(1)(cc), 170 & 171---Income from other sources---Assessee, a Bank---Compensation of delayed refund---Taxation of---Compensation on delayed refund was taxed on the ground that such receipts were revenue in nature---Validity---Legislature had made compensation on delayed refund a taxable receipt by insertion of clause (cc) in subsection (1) of S.39 of the Income Tax Ordinance, 2001 through Finance Act, 2012 with prospective effect---If compensation on delayed refund was covered within the ratio of judgment reported as 2006 PTD 246 (S.C.Pak), there would have been no need to provide its taxation by amending the law prospectively---Such was not taxable in earlier years otherwise the amendment in law would have been by way of an Explanation having retrospective effect---Section 39(1)(cc) of the Income Tax Ordinance, 2001 did not provide that amendment in law was retrospective even by necessary intendment, if not by explicit wording "shall deem to always to be so" which was always desired for any retroactive amendment---Compensation on delayed refund was taxable from tax year 2013 onwards---Present issue was decided in favour of taxpayer and against the department.

Model Town Society Ltd. v. ITAT 2006 PTD 2456 distinguished.

2006 PTD 1800 and C.I.T. Bengal Muffassil v. Burdhan Kuti Wards Estate (1960) 2 Tax (Suppel-1) rel.

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

----Ss.171, 120 & 122---Additional payment for delayed refunds---Assessee, a Bank---Taxpayer applied for compensation of delayed refunds for the period during which order under S.120 of the Income Tax Ordinance, 2001 prevailed and starting from three months after the receipt of appeal order by First Appellate Authority till the time refunds were adjusted---Department allowed compensation for the period starting from three months after the receipt of appellate order but rejected the claim for the period during which order under S.120(1) of the Income Tax Ordinance, 2001 was in field---First Appellate Authority allowed compensation for the period after 135 days of filing of return till the issuance of notice under S.122 of the Income Tax Ordinance, 2001---Validity---For the purpose of S.171(1) of the Income Tax Ordinance, 2001, the refund becomes due on the date of order treated to have been made under S.120(1) of the Income Tax Ordinance, 2001---Mere issuance of show cause notice did not exclude the return from the ambit of S.120(1) of the Income Tax Ordinance, 2001---Deemed order under S.120 of the Income Tax Ordinance, 2001 remained in field till amendment was made under S.122 of the Income Tax Ordinance, 2001---Appellate Tribunal directed that compensation should be allowed treating the refund due on the date of filing of original return---Refund due as a result of order under S.120(1) of the Income Tax Ordinance, 2001 shall continue to be due till amendment was made---Compensation will be computed after three months from the day the refund was due as provided in S.171(1) of the Income Tax Ordinance, 2001.

2010 PTD (Trib.) 519 and 2010 PTD (Trib.) 2602 rel.

Dr. Ikramul Haq and Mansoor Beg for Appellants (in I.T.As. Nos. 914/LB, 915/LB, 916/LB of 2009, 893/LB, 1052/LB, 1053/LB and 1054/LB of 2010).

Farrukh Majeed, DR and Muhammad Tahir DR for Respondents (in I.T.As. Nos. 914/LB, 915/LB, 916/LB of 2009, 893/LB, 1052/LB, 1053/LB and 1054/LB of 2010).

Farrukh Majeed, D.R. for Muhammad Tahir, D.R. for Appellants (in M.As. Nos. 146/LB of 2011, 1/LB of 2012, I.T.As. Nos.3292/LB of 2004, 1328/LB, 5510/LB, 7141/LB, 7142/LB of 2005, 1121/LB to 1123/LB of 2009, 1090/LB to 1092/LB and 930/LB of 2010).

Dr. Ikramul Haq and Mansoor Beg for Respondents (in M.As. Nos. 146/LB of 2011, 1/LB of 2012, I.T.As. Nos. 3292/LB of 2004, 1328/LB, 5510/LB, 7141/LB, 7142/LB of 2005, 1121/LB to 1123/LB of 2009, 1090/LB to 1092/LB and 930/LB of 2010).

Dates of hearing: 19th and 21st October, 2012.

2013 P T D (Trib.) 1159

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Khalid Aziz Banth, Accountant Member

I.T.As. Nos.1393/LB and 1409/LB of 2010, decided on 30th March, 2012.

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

----Ss.21(c), 120, 122(4) [as amended by Finance Act, 2009], 122(5-A), 127 & 131---Amendment of assessment---Limitation---Taxpayer filed return disclosing net income at Rs.2,652,643 which was taken to be an assessment order in terms of S.120(1) of Income Tax Ordinance, 2001---Said original assessment order was amended by Additional Commissioner and determined the income at Rs.3,167,143---Appeal filed by the taxpayer against order of amendment of assessment was partly accepted by Commissioner (Appeals) by way of reduction in addition, but action taken under S.122(5-A) of Income Tax Ordinance, was confirmed---Validity---Before amendment in S.122(4) of Income Tax Ordinance, 2001, time limitation for amending the assessment order was five years from the date of filing of return, whereas after amendment, the time limitation was extended---Amendment in S.122(4) of Income Tax Ordinance, 2001, enhancing period of limitation, having been made long after passing of original assessment order, same was not applicable to the case of taxpayer, for the reason that by filing of Income Tax return on 30-12-2004, a vested right had been created on the point of limitation in favour of taxpayer---Law as on the first day of assessment would apply and not the one coming into being by subsequent legislation---Amended assessment order being absolutely time barred and passed after the time limitation of five years, was vacated by Appellate Tribunal---Appeal filed by taxpayer was accepted, whereas departmental appeal, was dismissed.

1963 PTD 633 and 2005 PTD 259 rel.

(b) Interpretation of statutes---

----Retrospective operation of statute---Any statute which did not take away, curtail or affect any vested or substantive right, would operate retrospectively, unless the contrary was expressed---Retrospective operation of law would only apply if vested rights were not disturbed.

1996 SCMR 237 rel.

Javed Iqbal Qazi for Appellant.

Muhammad Tahir, D.R. for the Respondent.

Date of hearing: 29th February, 2012.

2013 P T D (Trib.) 1165

[Inland Revenue Appellate Tribunal of Pakistan]

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

C.I.T. (LEGAL DIVISION), LTU, ISLAMABAD

Versus

Messrs ZHONGXING TELECOM PAKISTAN (PVT.) LIMITED, ISLAMABAD

I.T.As. Nos.586/IB to 588/IB of 2009, decided on 5th January, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 148(7) & 153(5)(iii)---Amendment of assessment---Imports---Turnkey contracts---Contractual receipts---Adjustment of tax deducted at import stage---Taxes paid at the time of import and amount received against contractual receipts were treated as final tax liability on ground that S.148(7) of the Income Tax Ordinance, 2001 clarified the position of finality of tax collection at import stage by commercial importer and adjustable in cases where raw material had imported by industrial undertaking for their own consumption; that assessee company was engaged in number of turnkey contracts the items imported constituted part of company's turnkey contractual obligation; that supply of goods and execution of contract were separately described in S.153 of the Income Tax Ordinance, 2001; and that tax-deductible against contractual receipts was discharge of final tax liability---Taxpayer contended that S.153(5)(iii) of the Income Tax Ordinance, 2001 provided that goods should sold in the same condition as they were when imported; that the imported goods were not sold in the state in which they were imported and became part of the overall turnkey contracts, whereby they were consumed/used in furtherance of the contracts reached between the company and its customers; that goods imported for consumption/use in furtherance of contractual obligations could not be termed as commercial imports; that tax suffered at source from the receipts against contract was final discharge of tax liability; and that contracts executed were chargeable to tax under S.153 of the Income Tax Ordinance, 2001 and the incident of taxation would be at the stage of receipts in accordance with the terms of the respective contracts and not under S.148 of the Income Tax Ordinance, 2001 when items/spare parts etc. required for such contracts were imported---Validity---Assessee company had various contracts and raw material was imported for usage in these contracts; it could not be taxed twice, one, at the time of import stage and again at the stage of fulfilling contractual obligation---Full and final discharge of tax liability was to be applied at the final stage i.e. at the time of contractual payments and tax deducted at import stage was to be adjusted---Order passed by the First Appellate Authority was not open to any exception and it was upheld and maintained by the Tribunal---Departmental appeals being without any merit were dismissed.

Sardar Ali Khawaja, D.R. for Appellant.

Muddassar Khalid, ACA for Respondent.

Date of hearing: 5th January, 2010.

2013 P T D (Trib.) 1169

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member and Qurban Ali, Accountant Member

I.T.A. No. 431/IB of 2011, decided on 1st August, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120 & 122(4)(2) [as amended by Finance Act, 2009], 122(5-A) & 131---Amendment of assessment---Limitation---Assessment, in the present case, stood framed on the date of filing of return on 29-9-2004, and as per law prevailing at that point of time, amended assessment could only be made within five years i.e. up to 29-9-2009---Subsequently an amendment was brought to subsection (2) of S.122 of Income Tax Ordinance, 2001 by Finance Act, 2009 whereby limitation for amendment in assessment order was extended upto the expiry of five years from the end of the financial year in which the Commissioner had issued the assessment order to the taxpayer---Assessing Officer found that amendment in S.122(2) of Income Tax Ordinance, 2001 was applicable retrospectively---Validity---Finance Act, 2009, whereby amendment was brought, had stated that unless otherwise provided, would Act would come into force on 1-7-2009---No intention whatsoever was found to suggest that amendment would be applicable retrospectively---Right of amendment of assessment upto 29-7-2009 had accrued to taxpayer consequent upon filing of return/deemed assessment on 29-9-2009 as per law then prevailing and department could complete the amendment in assessment upto said date (29-9-2009) only, as against that position, proceedings for amendment of assessment under S.122 of the Income Tax Ordinance, 2001 were initiated on 13-5-2010, after lapse of limitation period---Proceedings could not be said to be even pending on promulgation of Finance Act, 2009 which was 1-7-2009---Impugned amendment order was barred by time and was void ab initio, in circumstances.

Abdul Basit, FCA and Hafiz Muhammad Idrees for Appellant.

Zia-Ullah-Khan, D.R. for Respondent.

Date of hearing: 13th June, 2012.

2013 P T D (Trib.) 1173

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs PAKISTAN REVENUE AUTOMATION (PVT.) LTD., ISLAMABAD

Versus

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

I.T.A. No.219/IB of 2012, decided on 6th February, 2013.

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

----S. 21(e)---Deductions not allowed---Contribution to approved gratuity fund---Add back---Taxpayer contended that in financial statements it was mentioned as provision of gratuity and the word "provision" was in fact "payable"; that gratuity fund was an approved fund and under S.21(e) of the Income Tax Ordinance, 2001 such provision could only be disallowed in case of unapproved fund; and that since gratuity was an approved fund, the add back could be upheld by the First Appellate Authority---Validity---Gratuity claimed by the taxpayer on account of contribution to approved gratuity fund had been disallowed, in financial statement it was mentioned as provision of gratuity, it was ascertained liability for gratuity which was an approved fund and under S.21(e) of the Income Tax Ordinance, 2001 such provision could only be disallowed in case of unapproved fund---Such figure was allowable in view of calculation for entitlements of gratuity of various employees---Issue was answered in favour of taxpayer and against the department.

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

----S. 20---Deduction in computing income chargeable under the head "Income from Business"---Salary and wages---Add back---Taxpayer stated that he had duly maintained record of salaries and wages; made payment through cross cheques; that twelve month's complete details of salaries were provided to tax officer; that not a single instance of tax withholding provisions had been pin-pointed and huge add back was made; that such expenses had duly been incurred for the purposes of its business and if these were not to be incurred, it would not to be able to do its business which was purely services provision to clients as these expenses were incurred to earn its revenue; that there was no element of personal nature in any of the expenses particularly when the taxpayer company was a government concern and was twice audited by independent courses and no such deficiency had ever been pointed by any of the auditors; that not a single specific deficiency in any payment had been pointed out; and that tax had not been deducted where salaries were below threshold---Validity---Amount disallowed on percentage basis was not warranted in circumstances---Appellate Tribunal set aside the orders passed by both the officers below and remanded the case to Office of Inland Revenue to re-analyze the details as which of the payments were below threshold.

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

----Ss.20, 130 & 131---Deductions in computing income chargeable under the head "Income from Business"---Lease expenses---Add back---Remand of case by the First Appellate Authority---Taxpayer contended that First Appellate Authority could not set aside an issue in view of amended provisions of Ss.130 & 131 of the Income Tax Ordinance, 2001 and claimed that lease installments were proper, correct and verifiable even from third party i.e. leasing company and merely the cash flow statement could not be based for such disallowance; that even the cash flow statement could not be based for determining the quantum of such amount and said fact was submitted to tax officer; and tax officer could have asked for a lease schedule and agreement, payment vouchers for all 12 months and would have easily confirmed and proved the claim; and that proof of payment of lease installments were provided but it had been ignored---Validity---By setting aside and remanding the issue of lease installment, none of right of taxpayer was prejudiced because he could show record at the lower forum and get relief, officer would pass a speaking order after providing an opportunity of hearing to the taxpayer.

Asad Asam FCA for Appellant.

Tahir Khan, D.R. for Respondent.

Date of hearing: 6th February, 2013.

2013 P T D (Trib.) 1178

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Imran Masood, Member Judicial

Customs Appeal No.58/LB of 2011, decided on 27th September, 2012.

Customs Act (IV of 1969)---

----Ss. 32 & 156(1)(14)---Mis-declaration by exporter---Summary adjudication---Non-issuance of show-cause notice---Appellant/exporter had mis-declared the weight of exported material in terms of S.32 of Customs Act, 1969 punishable under S.156(1)(14) of Customs Act, 1969---Appellant who filed application for summary adjudication, had alleged that no show-cause notice was issued to him---Validity---Matter in issue was quite in the knowledge of the appellant, and no bias had been created against him for non-issuance of show-cause notice---Generally, in case of summary adjudication, the show-cause notice was given verbally---Appellant had already complied with the order passed by Adjudicating Officer---Contention of the appellant with regard to non-issuance of show-cause notice, was devoid of any force, as no bias was created against him.

Tariq Najib for Appellant.

Ahmad Kamal D.R. with Habib-ur-Rehman, Inspector for Respondent.

Date of hearing: 10th August, 2011.

2013 P T D (Trib.) 1181

[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 MOINSONS (PVT.) LTD., RAWALPINDI

I.T.A. No.124/IB of 2012, decided on 4th October, 2012.

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

----S. 221---Rectification of mistake---Assessment was annulled by the First Appellate Authority---Initiation of fresh assessment proceedings under S.221 of the Income Tax Ordinance, 2001 as the department had still limitation to rectify the deemed assessment and which was rectified---Validity---If department could not fulfil the legal requirement in the manner as prescribed under the law or basis of assessment was without authority, then the entire superstructure built thereon would fall on the ground automatically---By annulling the rectified /amended assessment order passed by the tax authorities was removed from the way and in result, deemed assessment remained in the field---Department was well within its functioning by opting proper legal course and procedure if the limitation was not beyond the clock.

I.T.As. Nos.432 and 433/IB of 2009 dated 17-10-2009 rel.

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

----Ss.153(1)(c), 153(6), 115(4), 234-A, 235 & 236---Payment for goods, services and contracts---Execution of contract---Final discharge of tax liability---Denial to give credit of tax deducted under Ss.235 and 236 of the Income Tax Ordinance, 2001---Taxpayer contended that demand created after denial of adjustment, cash payment of tax, which was adjustable was not sustainable---Validity---Controversy, in the present case, was that if value of contract exceeds Rs.30 million then the rate of tax would be 6% on gross payment and in any other case 5% of gross payments under Clause (c) of subsection (1) of S.153 of the Income Tax Ordinance, 2001---Factual sides of the contractual receipts concluded by the Assessing Officer, were correct ones---Taxpayer was liable to pay the difference of tax calculated on contract receipts more than Rs.30 million @ 6%---Taxpayer, however, shall be given tax credit under Ss.235 and 236 of the Income Tax Ordinance, 2001 and even of the cash payment of tax with the return---Departmental appeal was partially accepted and taxpayer was directed to deposit the tax.

I.T.A.'s Nos.432-433/IB of 2009 dated 17-10-2009; Pakistan through the Secretary, Ministry of Finance v. Muhammad Himayatullah Farukhi PLD 1969 SC 407; Chairman, Selection Committee/Principal, King Edward Medical College Lahore v. Wasif Zamir Ahmed and another 1997 SCMR 15; Black's Law Dictionary 7th Edition Page 53; 21st Century Dictionary Page 18; Webster's New World Dictionary page; 95 Taxation (Statute at Page 314); 2009 PTD 1; (1921) 1 KB 64 page 71 and (1965) 55 ITR 741 at page 747 ref.

Jawad Khan, D.R. for Applicant.

Akhtar Hussain for Respondent.

Date of hearing; 4th October, 2012.

2013 P T D (Trib.) 1186

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman

Messrs ABDUL RASHEED, Prop. Modern Steel House, Layya

Versus

C.I.R., R.T.O., MULTAN

I.T.A. No.1037A/LB of 2012, decided on 7th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 121, 122 & 120---Unexplained income or assets---Definite information---Ex parte order was passed by making addition including deemed income on the basis of information that three motor vehicles were registered in the name of taxpayer---Taxpayer contended that addition was made without verifying ownership of the cars which showed that no definite information was available with the department; that one vehicle was purchased under hire purchase agreement by Bank and letter of authority issued to drive the vehicle and paying/declaring in income tax return rental instalment only, while second vehicle as against engine number and chassis number declared by the Revenue was neither the property of the taxpayer nor paying instalments under hire purchase agreement; and that proper opportunity of being heard had also not been provided which was against the maxim audi alteram partem---Validity---Addition had wrongly been made since no definite/ correct information was available with the department because only one vehicle belonged to the taxpayer which was also obtained on lease under hire purchase agreement from bank and three instalments were paid, the same could not be treated as investment---Second vehicle did not belong to the taxpayer for the reason that the department had failed to verify the ownership as well as the exact invested amount which meant no definite information was available with the department as envisaged in S.122 of the Income Tax Ordinance, 2001---Such infirmities established that the proceedings of assessment were altogether illegal and not warranted by law---Even otherwise, no proper opportunity of being heard was allowed to the taxpayer which was against the fundamental rules of natural justice since no one can be condemned unheard.

1994 SCMR 2232 rel.

Riaz Ahmed ITP for Appellant.

Syed Bahadar Ali, D.R. for Respondent.

Date of hearing: 7th November, 2012.

2013 P T D (Trib.) 1189

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

Messrs MALIK ENTERPRISES, RAWALPINDI

Versus

COMMISSIONER INLAND REVENUE (APPEALS-III), ISLAMABAD

M.As. (AG) Nos.44/IB, 45/IB and S.T.As. Nos.327/IB, 50/IB of 2012, decided on 8th January, 2013.

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

----S. 2(37)---Tax fraud---Condition---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.

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

----Ss. 2(37) & 73---Qanun-e-Shahadat (10 of 1984), Art.117---Tax fraud---Adjustment of input tax---Evidence---No evidence was available wherefrom it could be deduced that the taxpayer had knowingly or dishonestly or fraudulently committed tax fraud by claiming input tax adjustment against the sales tax invoices issued by the fraudster gang---Even audit contravention report could not be established with any concrete reasoning that the taxpayer was involved in tax fraud by claiming illegal sales tax input tax and had in any way violated the provisions of S.2(37) of the Sales Tax Act, 1990---Department had failed to fasten blame at the taxpayer's door---Entire edifice had been built, to hold the taxpayer as fraudulent, on conjecturers and surmises and whimsical inference had been drawn against the taxpayer on such set of facts---Record proved that there was ample justification with the taxpayer to claim adjustment of input tax, such as all the suppliers were registered persons and their status was active as per Federal Board of Revenue Website; they were regularly submitting their sales tax returns and summaries thereof; all the payments were made by the taxpayer in accordance with the provisions of S.73 of the Sales Tax Act, 1990: and taxpayer did not have any prior knowledge about fakeness of the sales tax invoices issued by the suppliers.

2004 PTD 868; 1988 CLC 578; 1990 ALD 619; 1988 MLD 552; PLD 1988 Kar. 28; 1982 CLC 1286; 1990 ALD 142(2); 1995 MLD 690; PLD 1997 Kar. 6; 2000 MLD 720; 2000 PLC 172; 2000 PLC 194; 2000 YLR 801; 2001 CLC 1922 and 2001 MLD 159 ref.

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

----S. 36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Premises of S.36 of the Sales Tax Act, 1990 was that 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---Department could not prove its allegation of collusion of the taxpayer with the supplier nor could bring on record any evidence that the tax payer had done fake transaction with deliberate act.

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

----S.73---Certain transactions not admissible---Taxpayer supplies material which were only local purchases to support monthly wholesale supplies and the sales tax returns for the corresponding months showing supplies made to verified purchasers, were submitted to prove that the suppliers were operative and goods were supplied---Taxpayer purchased the raw material and supplied the goods to other verified purchasers and in all such eventuality there hardly seemed any fraud and dishonestly; and taxpayer made all the payments against the purchases after fulfilling all the legal requirements of provision of S.73 of the Sales Tax Act, 1990.

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

----S.8A---Joint and several liability of registered persons in supply chain where tax unpaid---Taxpayer contended that he was not in knowledge that the supplier was not making payment of tax due to him and even the department was unaware that the suppliers were not making payment of tax whereas the fake suppliers were duly registered with the department were regularly submitting heir monthly sales tax returns and summaries---Effect---Taxpayer could not be said to be liable jointly and induction of contravention did not qualify---Non-speaking order had been declared null and void by the Appellate Tribunal---Taxpayer under prescribed mechanism of Value Added Tax, made payment of the input tax to the suppliers and the taxpayer had no access to confirm that the supplier had made payment in Government Treasury or not---Such 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---First Appellate Authority had passed the order under the influence of revenue side without application of its independent and judicious mind---Since 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 eyes of law---After adopting method for making payment as 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 government exchequer or not.

GST 2004 CL 71; GST 2003 CL 562 and GST 2004 CL 79 rel.

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

----Ss.11(3), 36 & 45-B(3)---S.R.O. 555(I)/1996 dated 1-6-1996---S.R.O. 594(I)/2012 dated 1-6-2012---Assessment of tax and recovery of tax not levied or short-levied or erroneously refunded---Pecuniary jurisdiction---Taxpayer contended that issuance of show cause notice and on the basis thereof passing the order-in-original was without jurisdiction as having been issued/passed by an officer of Inland Revenue not competent in terms of S.R.O. 555(I)/1996 dated 1-6-1996 holding the field at the relevant time on omission of S.45 of the Sales Tax Act, 1990 vide Finance Act, 2010; that pecuniary jurisdiction of the Deputy Commissioner was to deal with the cases involving amount of tax not exceeding one million rupees whereas the show cause notice was issued for alleged inadmissible input tax adjustment exceeding such limit; and that Deputy Commissioner Inland Revenue was not competent to issue show-cause notice or adjudicate the matter or pass original order being beyond the said monetary limit---Validity---Show cause notice issued by the Deputy Commissioner was beyond his pecuniary jurisdiction in terms of S.R.O. 555(I)/1996 dated 1-7-1996 and being so it was an order coram non judice and without lawful authority---Act of omission and commission taken without jurisdiction were illegal, void ab initio and no action could be taken against the taxpayer in pursuance thereof---Show cause notice, orders of the authorities below were annulled and the appeal of the registered person was accepted by the Appellate Tribunal.

S.T.A. No.531/LB of 2011; S.T.A. No.578/LB of 2011; S.T.A. No.530/LB of 2011; S.T.A. No.55/LB of 2011 and Messrs Worldcall Telecom Limited v. Commissioner Inland Revenue (Appeals-I), Lahore S.T.A. No.579/LB of 2012 rel.

Collect of Customs (Preventive) and 2 others v. Muhammad Mahfooz PLD 1991 SC 630; Federation of Pakistan through Ministry of Finance Islamabad v. Master Enterprises (Pvt.) Ltd. and 4 others 2003 PTD (SC) 1034; Messrs Food Consults (Pvt.) Ltd., Lahore v. Collector (Central Excise and Sales Tax), Lahore and 2 others Division/Chairman Central Board of Revenue, Islamabad and another 2004 PTD 1731; N.P. Water Proof Textiles Mills (Pvt.) Ltd. through Director, Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman Central Board of Revenue, Islamabad and another 2004 PTD (DB) 2952; Messrs Zikeria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; Collector of Customs Lahore and another v. Universal Gateway Trading Corporation and another 2005 SCMR 17; A.R.R. Textiles through Proprietor v. Federal of Pakistan through Ministry of Finance, Islamabad and 4 others 2006 PTD 1884; Messrs Haq Cotton Mills (Pvt.) Ltd., v. Chairman Central Board of Revenue and 2 others 2006 PTD 1884; Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd., and Messrs Diplex Beauty Clinic and others 2007 PTD 2356; Chairman CBR and others v. Haq Cotton Mills (Pvt.) Ltd. 2007 PTD (SC) 1351; 1997 SCMR 526; 1993 SCMR 216; 1993 SCMR 221; PLD 1994 SC 52; 1993 SCMR 133; PTR No.2 LHC DB; I.T.A. No.1078/LB of 2010; I.T.A. No.1079/LB of 2010; Federation of Pakistan v. Messrs Noorani Trading Corporation (Pvt.) Ltd. and others PTCL 1992 CL 363; Izhar Alam Farooqi Advocate v. Sheikh Abdul Sattar Lasi and others 2008 SCMR 240 and Messrs Kamran Industries v. Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68 ref.

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

----S.36(3), proviso---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Taxpayer contended that as per proviso to S.36 (3) of the Sales Tax Act, 1990, the order under the said provision of law should be made within 120 days of issuance of show cause notice or within such extended period as the Collector may for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed 120 days; that as per proviso to S.45(3)(2) of the Sales Tax Act, 1990 the order of the First Appellate Authority should have been passed not later than 120 days from the date of filing of appeal or within such extended period as the First Appellate Authority may for reasons recorded in writing, fix and that such period should in no case, exceed 120 days---Validity---Order-in-original dated 25-1-2012 had been passed after a lapse of almost 147 days from the date of issuance of show cause notice i.e. 8-8-2011---Order had been passed after the expiry of stipulated mandatory period, the same was illegal and unlawful in the eyes of law and liable to be set aside.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Straw Board Factory v. Collector (Adj) Customs Central Excise and Sales Tax, Gujranwala and 2 others 2008 PTD 378; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore 2009 PTD (Trib.) 1263; Messrs Kay Chemist, Karachi v. Collector of Customs, Central Excise and Sales Tax (Appeals) Karachi-III, 2011 PTD (Trib.) 408 and 2008 PTD 2025 rel.

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

----Ss. 2(37) & 73---Tax fraud---Taxpayer used material i.e. waste paper etc. which were locally purchased and processed---Monthly electricity bills and sales tax returns for the corresponding months showing supplies made to verified purchases, were submitted to prove that the manufacturing unit was operative and consumed the raw material---Taxpayer purchased the raw material and consumed the same and supplied the manufactured goods to other verified parties and in all this eventually there hardly seemed any fraud and dishonesty; and all the payments against such purchases were made after fulfilling all the legal requirements of provisions of S.73 of the Sales Tax Act, 1990.

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

----S.8A---Joint and several liability of registered persons in supply chain where tax unpaid---Taxpayer contended that the fact that "supplier was not making payment of the tax due to him" was not in his knowledge and even department was unaware that the suppliers were not making payment of tax whereas the alleged fake suppliers were duly registered with the department and were regularly submitting their monthly sales tax returns and summaries---Held, taxpayer could not be evolved as joint liable and the induction of the taxpayer's contravention did not qualify---Such like non-speaking orders was declared null and void by the Tribunal.

GST 2004 CL 71; GST 2003 CL 562 and GST 2004 CL 79 rel.

(j) Interpretation of statutes---

----Application of any rule/law is always prospective and not retrospective. [p. 1218] M

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

----S.30A---S.R.O. 555(I)/1996 dated 1-7-1996---Directorate General, (Intelligence and Investigation) Inland Revenue---Jurisdiction---Investigation audit conducted by the officials of the Directorate General Intelligence and Investigation was without jurisdiction, in defiance of Board's instructions issued vide letter dated 15-11-2010; the officials of the Directorate General Intelligence and Investigation could not exercise powers of Inland Revenue Officers unless notification under S.30A of the Sales Tax Act, 1990 was issued appointing such officers; and the show cause notice and order-in-original passed by the Deputy Commissioner Inland Revenue and Assistant Commissioner Inland Revenue were without pecuniary jurisdiction in terms of S.R.O. 555(I)/ 1996 dated 1-7-1996---Act of omission and commission taken without jurisdiction were illegal and void ab initio and no action could be taken against the taxpayer in pursuance thereof---Show cause notice, orders of the authorities below were annulled and appeal of the taxpayer was accepted by the Appellate Tribunal.

2011 PTD (Trib.) 2822; 2011 PTD (Trib.) 866 and 2010 PTD (Trib.) 1631 ref.

Muhammad Farooq Sheikh for Appellant.

Hassan Ullah D.R. for Respondent.

Date of hearing: 8th January, 2013.

2013 P T D (Trib.) 1219

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs OVERSEAS PAKISTANIS FOUNDATION, ISLAMABAD

Versus

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

I.T.As. Nos.853/IB and 960/IB of 2012, decided on 28th February, 2013.

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

----Ss. 120, 122(5-A) & 177---Original assessment, amendment of---Scope stated.

After promulgation of Income Tax Ordinance, 2001, original assessment can be amended as many times as it is requisite, but only on new issues and not on those issues, which already became source of amendment or subject matter of appeal.

2011 PTD (Trib.) 1807 ref.

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

----Ss. 121, 122 & 177---Deemed assessment---Initiation of two simultaneous proceedings for amendment of such assessment---Scope---Provision of S. 121(i)(d) of Income Tax Ordinance, 2001 could be applied where return was not filed or was invalidated---In presence of deemed assessment and without its invalidation, second amendment thereof would amount to two assessments simultaneously.

2009 PTD 1392 (S.C. Pak); 2010 PTD 1506 (H.C.); 2010 PTD (Trib.) 1700; 2010 PTD (Trib.) 1709; 2010 PTD (Trib.) 2162; 2011 PTD (Trib.) 321 and I.T.A. No.1922/KB of 2007 ref.

(2010) 101 Tax 404 (Trib.) distinguished.

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

----Ss. 122 & 177---Amendment of assessment after completion of audit of tax affairs of a person under S. 177 of Income Tax Ordinance, 2001---Assumption of jurisdiction by Assessing Officer---Essential requirements---Assessing Officer for assuming jurisdiction under Ss.122(5) and/or 122(5-A) of Income Tax Ordinance, 2001 would have to issue notice under S. 122(9) thereof---Taxpayer through his reply to such notice could challenge jurisdiction of Assessing Officer either to be lacking or in excess.

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

----Ss. 20, 21 & Second Sched. Cl. (92)---Exemption---Overseas Pakistanis Foundation Girls College---Receipts of the College appearing in its Bank statement---Charge of income tax---Validity---Income related to the College belonged to such Foundation, which had not claimed exemption thereon, thus, would not be entitled to exemption under Cl. (92) of Second Sched., of Income Tax Ordinance, 2001---Foundation was allowed all related expenses of such College, in circumstances.

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

----Ss. 20 & 21(n)---Investment in Pakistan Investment Bonds at premium by Overseas Pakistanis Foundation---Amortization of premium, deductibility of---Scope---Total amount of premium was amortized over period of maturity of such bonds, thus, there was no disposal of investment before maturity---State Bank of Pakistan had already deducted income tax from interest paid on such Bonds to Foundation---Such amortized amount for being prepaid expenditure was allowable, thus, addition made on such account would be liable to be deleted.

(2004) 90 Tax 116 (Trib.) and 2013 PTD (Trib.) 246 rel.

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

----S. 2(f)---West Pakistan Shops and Establishment Ordinance (VIII of 1969), S. 2---Overseas Pakistanis Foundation---Workers' Welfare Fund, levy of---Scope---Foundation for being a State-owned entity was specifically excluded from definition of Industrial establishment and/or commercial establishment contained in Workers' Welfare Fund Ordinance, 1971 and West Pakistan Shops and Establishments Ordinance, 1969---Workers' Welfare Fund was not leviable upon the Foundation.

2011 PTD 2643 ref.

Muhammad Jawaid, Khura for Applicant (in I.T.A. No.853/IB of 2012).

Tahir Khan, D.R. for Respondent (in I.T.A. No.853/IB of 2012).

Tahir Khan, D.R. for Appellant (in I.T.A. No.960/IB of 2012).

Muhammad Jawaid, Khuram for Respondent (in I.T.A. No.960/IB of 2012).

Date of hearing: 28th February, 2013.

2013 P T D (Trib.) 1239

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Khalid Aziz Banth, Accountant Member

I.T.As. Nos.579/LB and 580/LB of 2010, decided on 20th June, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S. 122-A---Income Tax Ordinance (XXXI of 1979) (Repealed), S.66(1)---Revision of order passed by Deputy Commissioner---Limitation---Under provisions of S.66-A(2) of Income Tax Ordinance, 1979, no order of Deputy Commissioner could be revised after expiry of four years---Finding of the department that S.66(1) of repealed Ordinance was applicable to case of assessee, was not correct---Proceedings completed under S.66-A of repealed Ordinance, being time barred, impugned orders passed under S.66-A, Income Tax Ordinance, 1979 were cancelled being void ab initio and nullity in the eyes of law.

CIT v. Paul Brothers (1995) 216 ITR 548; Russell Properties (P.) Ltd. v. A. Chowhdury, Addl. CIT (1977) 109 ITR 229; CIT v. G.M. Mittal Stainless Steel (Pvt.) Ltd. (2003) 130 Taxman 67/263 ITR 255 (SC); Elli Lilly's case 2009 SCMR 1279; 2005 PTD (Trib.) 960 and 2009 PTD 1392 ref.

Muhammad Arshad for Appellant.

Karamat Ullah Ch. D.R. for Respondent.

Date of hearing: 20th June, 2012.

2013 P T D (Trib.) 1246

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs OIL AND GAS DEVELOPMENT COMPANY LIMITED, ISLAMABAD

Versus

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

S.T.A. No.38/IB of 2013, decided on 10th April, 2013.

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

----Ss.11(4) & 74---Liquid Petroleum Gas, supply of---Issuance of show cause to Gas Supply Company for having undervalued such supply for payment of sales tax---Issuance of such notice to taxpayer after 12 years from relevant tax period and powers of Federal Board of Revenue to condone such delay in exercise of its powers under S. 74 of Sales Tax Act, 1990---Scope---Such notice could be issued within five years from date of detection of default under Sales Tax Act, 1990---Commissioner could extend such period of five years upto sixty days, but not beyond that---Such notice issued about 12 years ago would be without lawful authority---Federal Board of Revenue had no jurisdiction to condone a statutory limitation as contained in S. 11(4) of Sales Tax Act, 1990---Board could not condone such delay at request of revenue without giving prior notice thereof to taxpayer---Adjudicatory proceedings, if initiated on basis of such notice, would be illegal---Illustration.

2006 PTD 537; 2006 PTD 337; 1999 PTD (Trib.) 8 and 2008 PTD 1973 rel.

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

----Ss. 11(4) & 74---Show cause notice, issuance of---Powers of Federal Board of Revenue to condone delay caused in issuing such notice to taxpayer---Scope---Board in exercise of its powers under S. 74 of Sales Tax Act, 1990 could not condone statutory limitation period provided for issuance of such notice under S. 11(4) thereof---Principles.

The FBR has not been vested with the authority to condone a statutory limitation envisaged in section 11(4) of the Sales Tax Act, 1990.

A show cause under S. 11(4) of the Sales Tax Act, 1990 can be lawfully issued only within 5-years from the date of detection of a default under the Sales Tax Act, 1990. However, this period of 5-years can be extended by the Commissioner, in no case, beyond a period of 60 days.

The FBR's power to condone a time limit under section 74 of the Sales Tax Act, 1990 only applies to the time limitation for passing an adjudicatory order on anything, which addresses a genuine difficulty of a taxpayer for example the breach of time limit for filing of a tax returns or refund/input claim and any other act for which an applicant has an otherwise legal right arising from any other provision of the Sales Tax Act, 1990. This power does not extend to the statutory limitation of time referred to in section 11(4) of the Sales Tax Act, 1990. If FBR's authority to condone a time limit as fundamental as the time limitation provided in section 11(4) of the Sales Tax Act, 1990 is accepted, it lead to opening of a Pandora box leading to hunting of the taxpayers in case the FBR's or its subordinate officers failed to take timely action against a taxpayer claimed by them to be in default.

Mian Nazir Azhar and Saeed Hassan, ITP for Appellant.

Syed Imran Shah, FCA, DR for Respondents.

Date of hearing: 10th April, 2013.

2013 P T D (Trib.) 1256

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs HOTEL ONE (PVT.) LTD.

Versus

DEPUTY COMMISSIONER INLAND REVENUE (ZONE-I), ISLAMABAD

S.T.A. No.353/IB of 2012, decided on 11th April, 2013.

Sales Tax Act (VII of 1990)---

----S.8(1)---Input tax adjustment's claim of assessee denied by revenue for not reflecting in supplier's sale summary of payment output tax by assessee for relevant period---Assessee's plea was that supplier's sale summary was filed after confirmation of tax demand by Appellate Authority---Validity---Assessee in such circumstances would deserve to have an opportunity of proving his case in light of entries in sale summary furnished by him to revenue---Tribunal remanded case to Assessing Officer for its decision on merits after allowing assessee another opportunity to justify his input claim.

2006 PTD 116; PTCL 2003 CL 362; 2005 PTD 480; 2012 PTD 1113; 2012 PTD 885; 2011 PTD 2679; 2011 PTD 2822; 2012 PTD 885 and 2012 PTD 73 ref.

Zahid Farooq, ACA for Appellant.

Imran Shah, FCA, DR for Respondent.

Date of haring: 11th April, 2013.

2013 P T D (Trib.) 1265

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

Malik FURRUKH

Versus

COMMISSIONER INLAND REVENUE (LEGAL), RAWALPINDI

I.T.As. Nos.639/IB to 651/IB of 2011, decided on 25th May, 2012.

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

----Ss. 13(1)(aa), 56, 62 & 114---Reopening of assessment---Income earned from different properties not explained in tax return by assessee---Addition in income by Assessing Officer without approval of Additional Commissioner and issuing notice to assessee---Validity---Assessee himself had filed returns for relevant years and income declared therein tallied with statement filed by him, thus, issuance of notice to him under S. 56 or S.114(4) of Income Tax Ordinance, 1979 had become irrelevant---Obtaining approval of Additional Commissioner before making such addition was a mandatory requirement of law, thus, addition in absence of such approval could not sustain---Such addition for being unlawful, without jurisdiction and nullity in eye of law was deleted in circumstances.

2005 PTD 2345; 2011 PTD (Trib.) 218; 2010 PTD (Trib.) 494; 2007 PTD (Trib.) 676; (1963) 7 Tax 223(SC); 2005 91 Tax 146 (Trib.); 1983 PTD (Trib.) 184; I.T.A. No.1902 etc. (1B) 2005 dated 29-7-2006 Messrs Metro (Pvt.) Ltd.; (2009) 99 Tax 150 (Trib.); I.T.A. No.86-91 (PB of 2005 dated 29-7-2006; 1988 PTD (Trib.) 992; 1988 PTD 612; 2006 PTD (Trib.) 429; 2006 PTD (Trib.) 123; 1993 PTD (Trib.) 1172; 2003 PTD (Trib.) 1238; 2004 PTD (Trib.) 463; 2004 PTD (Trib.) 726 and 2010 PTD (Trib.) 567 ref.

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

----Ss. 108 & 116---Tax returns late filing of---Imposition of penalty by Assessing Officer without approval of Additional Commissioner---Validity---Such approval was a mandatory requirement of law---Impugned penalty was deleted in circumstances.

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

----S.62---Assessment of non-resident taxpayer without appointing his agent, reopening of---Validity---Whole assessment or proceedings could not be quashed for such failure of department, being a technical lapse.

Hafiz Muhammad Idrees for Appellant.

Ziaullah Khan, D.R. for Respondent.

Date of hearing: 25th May, 2012.

2013 P T D (Trib.) 1283

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs MOTORCYCLE ZONE SHOP, SARGODHA

Versus

COMMISSIONER INLAND REVENUE (APPEALS), RTO, FAISALABAD and another

S.T.A. No.208/IB of 2012, decided on 11th April, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 23 & 73---Input tax adjustment's claim of non-registered person (distributor of motorcycles) denied by revenue for not being reflecting in supplier's supplies of output tax for relevant period---Validity---Misreporting applicant as non-registered person by his supplier wrongly, would not justify infliction of financial loss on him---Revenue knew that applicant was a distributor of motorcycles and could not transact his business without sales tax registration, thus, could direct his supplier to fix such mistake---Revenue had power to figure out whether applicant claiming input tax had duly discharged onus of payment of output sales tax at time of making any taxable transaction---Assessing Officer by allowing applicant an opportunity to explain difference between amount of his input tax claim and mistake in supplier's sale summary---Applicant if having paid corresponding output tax, then his claim of input tax might be accepted---Tribunal remanded case to Assessing Officer for its decision accordingly.

2010 PTD (Trib.) 2656; 2011 PTD (Trib.) 1943; 2012 PTD (Trib.) 350 and 2004 PTD 868 ref.

Rai Umer Ashraf Bhatti for Appellant.

Ehsan Ullah Khan D.R. for Respondent.

Date of hearing: 11th April, 2013.

2013 P T D (Trib.) 1288

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.A. No.779/LB of 2011, decided on 19th June, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161 & 205---Income Tax Rules, 2002, R.44(4)---Failure to pay tax, collected or deducted---Taxpayer had failed to deduct tax on payments made under various heads, and same were not deposited into Government Treasury---Authorities had also found certain gaps in payments on which tax was deducted, and the total payments made---Notices under Ss.161 & 205 of the Income Tax Ordinance, 2001 were issued, requiring the taxpayer to produce documents/details for reconciliation, but all in vain, as the taxpayer on the due dates always applied for adjournment, which was turned down---On filing appeal by the taxpayer Commissioner (Appeal) remanded the matter back to Deputy Commissioner by way of setting aside order passed under Ss.161/205 of Income Tax Ordinance, 2001---Validity---Commissioner (Appeals) had no power to remand case under existing provisions relating to its jurisdiction---Impugned order on the point of jurisdiction was vacated---Due to gap in actual payments and the payments from which tax had been deducted, the matter required reconciliation in the light of provisions of R. 44(4) of Income Tax Rules, 2002, for which an adequate opportunity had been denied to the taxpayer---Appellate Tribunal to remanded the matter to Taxation Officer to reinitiate proceedings in accordance with law, after providing adequate opportunity to the taxpayer.

None for Appellant.

Jalal Ahsan, FCA for Respondent.

Date of hearing: 19th June, 2012.

2013 P T D (Trib.) 1290

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs PAKISTAN TELEVISION CORPORATION LIMITED, ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE (APPEALS-II), ISLAMABAD

S.T.A. No.418/IB of 2012, decided on 14th March, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 11 & 23---Input tax credit for relevant period claimed by registered person---Such input tax found missing in supplier's sale summary---Plea of registered person was that for non-deposit of sales tax by its supplier, recovery proceedings could be initiated against registered person---Validity---Assessing Officer was legally obliged to determine veracity of such plea---Registered person, if became successful, in producing credible evidence of payment of sales tax corresponding to his input tax claim, then its such claim might be allowed and simultaneously recovery proceedings might be initiated against supplier for his failure to deposit sale tax.

Atif Bin Arshad, FCA for Appellant.

Syed Imran Shah, FCA, D.R. for Respondent.

Date of hearing: 14th March, 2013.

2013 P T D (Trib.) 1297

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zaheer-ud-Din, Accountant Member

I.T.As. Nos.5545/LB and 5546/LB of 2005, decided on 21st May, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133(5) & 136(6)---Amendment of assessment---Reference to High Court---Scope---Procedure---Provisions of S.136(6) of (repealed) Income Tax Ordinance, 1979 and S.133(5) of Income Tax Ordinance, 2001, relating to Reference to High Court---Distinction---Under provisions of S.136(6) of (repealed) Income Tax Ordinance, 1979, Tribunal was required to pass an order where it was necessary to dispose of the case conformably to the judgment of High Court; whereas S.133(5) of Income Tax Ordinance, 2001, Tribunal was not required to pass any order, rather the order of Tribunal would stand modified accordingly by operation of law---Tribunal had no power to comment even on the judgment delivered by High Court---Order under the repealed Ordinance was only an administrative order to be communicated to the parties pointing out necessary effect of High Courts judgments to bring the order of the Tribunal in conformity with the judgment passed by High Court---Under the new provision of law, the order sent by High Court, was required to be placed in respective file only---Order passed by High Court being self-explanatory, parties concerned were bound by that judgment.

Elli Lilly Pakistan (Pvt.) Ltd. (2009) PTD 1392 ref.

Sajjad Tasleem D.R. for Appellant.

Viqar A. Khan, for Respondent.

Date of hearing: 21st May, 2012.

SHAHID JAMIL KHAN (JUDICIAL MEMBER).---These appeals are fixed upon receiving a judgment dated 17-2-2010 by Lahore High Court, Lahore. Honourable Court has sent this judgment under its seal, as required under section 133 subsection (5) of Income Tax Ordinance, 2001. These appeals were decided by this Tribunal and following questions of law, from the judgment of Tribunal were placed before Honourable High Court:--

(i) "Whether under the facts and in circumstances of the case the learned ITAT was legally justified in holding that section 122(5A) of the Income Tax Ordinance, 2001 brought into statute through Finance Act, 2003 is not applicable to the assessments completed before the promulgation of the Income Tax Ordinance, 2001, whereas the amendment brought in through Finance Ordinance, 2002 in subsection (1) of section 122 extends the applicability of section 122 to the assessments completed under the provisions of Income Tax Ordinance, 1979 as well?

(ii) Whether under the facts and in circumstances of the case the learned ITAT was legally justified to overlook the distinction between the provisions of law being substantive in nature i.e. the charging sections and the provisions of law relating to procedure"?

1. Since these questions had already been decided by Supreme Court of Pakistan in Elli Lilly Pakistan (Pvt.) Ltd., case 2009 PTD 1392, therefore, Honourable High Court, after reproducing relevant portion from the judgment decided all Tax References in following words:--

"As the questions of law raised in these Tax References have been answered by the Supreme Court of Pakistan, these references are, therefore, disposed of in terms of the above referred judgment of the august Supreme Court of Pakistan".

1. It is pointed out by the representatives appearing for taxpayers, that under the provisions of subsection (5) to section 133 of Income Tax Ordinance, 2001, this Tribunal is not required to pass any consequential order. In their opinion, judgments of this Tribunal "stood modified accordingly" by operation of law. The DR, appearing for the department, however, have submitted that provisions of the Repealed Income Tax Ordinance, 1979 shall apply, where this Tribunal was required to pass an order to give effect to the modification in its judgments, keeping in view the judgment by Honourable High Court. The DR has also pointed out that in some of the references, decided by the Honourable High Court the questions noted in the judgment by the Honourable High Court were not referred and the said references were inadvertently decided. It is also contended that the Tribunal has to observe that the question of law decided by the Honourable High Court did not arise from its judgment.

2. We have carefully examined the existing and repealed provisions of the Income Tax Ordinances of 2001 and 1979. Under the sub-section (6) of section 136 of the Repealed Income Tax Ordinance, 1979 the Tribunal was required to pass an order where it was necessary to dispose of the case conformably to the judgment by the High Court. Whereas in the existing provisions i.e. subsection (5) of the section 133 of the Income Tax Ordinance, 2001 the Tribunal is not required to pass any order rather the order of Tribunal stands modified accordingly by operation of law. Relevant subsections of both the Ordinances are reproduced here:--

Section 136(6) of ITO 1979

The High Court upon the hearing of any such case, shall decide the questions of law raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded and shall send a copy of such judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment.

Section 133(5) of ITO 2001

"The High Court upon hearing a reference under this section shall decide the question of law raised by the reference and pass judgment thereon specifying the grounds on which such judgment is based and the Tribunal's order shall stand modified accordingly. The Court shall send a copy of the judgment under the seal of the Court to the Appellate Tribunal."

2013 P T D (Trib.) 1300

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs UNIQUE ENTERPRISES, RAWALPINDI

Versus

COMMISSIONER INLAND REVENUE, ISLAMABAD

S.T.A. No.241/IB of 2012, decided 17th April, 2013.

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

----S. 3---Stock held in form of drums of lubricants---Benefit of wastage in respect of such stock, assessee's entitlement to---Scope---No statutory or non-statutory power existed allowing benefit to assessee on wastage to such stock---Assessing Officer had no power to allow wastage during storage/transit or handling of oil cargo---Amount of sales tax, if remitted by Assessing Officer on wastage of oil, would be liable to be recovered from assessee---Illustration.

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

----Ss. 2(46) & 3---Stock of lubricants held in form of drums---Liability of assessee to pay sales tax on that part of stock held for self consumption---Scope---Such part of stock held by assessee for self consumption and that supplied to others would constitute taxable activity and sales tax would be chargeable on both such supply transactions---Value shown by assessee in invoices issued to others would provide a credible value standard for calculating sales tax on supply for its self consumption---Illustration.

Tariq Mehmood for Appellant.

Syed Imran Shah, FCA, D.R. for Respondent.

Date of hearing: 17th April, 2013.

2013 P T D (Trib.) 1309

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs TOYOTA RAWAL MOTORS, RAWALPINDI

Versus

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

S.T.A. No.382/IB of 2012, decided on 5th March, 2013.

Sales Tax Act (VII of 1990)---

----S.25---Demand raised against registered person for its failure to deduct withholding tax on taxable supplies---Effect---Reopening case of supplier, in presence of such demand already raised against registered person, would amount to taxing twice---Illustration.

Abdul Basit, FCA for Appellant.

Imran Shah, D.R. for Respondent.

Date of hearing: 5th March, 2013.

2013 P T D (Trib.) 1313

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwah, Judicial Member and Tabbana Sajjad Naseer, Accountant Member

I.T.A. No.4291/LB of 2001, decided on 23rd July, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 150 & 161---Liability of persons failing to deduct or pay tax---Assessee in default---Scope---Charge of additional tax for failure to deduct and pay tax---Tax-payer had been treated as assessed in default on the allegation that deduction was not made in accordance with law---Contract had been executed; and the person responsible for making payment was a third person who was making payments on behalf of the contracting parties---In the present case assessee in default had been treated the contracting party i.e. the company, whereas person responsible for making payment had to deduct the tax; and he could only be treated as assessee in default---Default had to be established by the Assessing Officer in clear terms, which was missing in the present case---Assessing Officer had not confronted the assessee for any default after receiving the reply/information from the assessee, which defect had made the order void---Assessing Officer, could only hold the Principal Officer or person responsible for making payment as assessee in default---Order passed under Ss.52/86 of repealed Income Tax Ordinance, 1979 was not maintainable in the eyes of law, which was cancelled by upholding the order of first Appellate Authority.

2012 PTD 122; 2000 PTD 3396; PLD 2008 SC 779 and 2012 PTD 122 (Trib.) ref.

M. Tahir, D.R. for Appellant.

Muhammad Iqbal Hashmi for Respondent.

Date of hearing: 23rd July, 2012.

2013 P T D (Trib.) 1319

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

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

Versus

Khawaja BASHIR AHMAD & CO., MULTAN

I.T.A. No.154/LB of 2012, decided on 24th April, 2011.

Worker's Welfare Fund Ordinance (XXXVI of 1979)---

----S.4---Income Tax Ordinance (XLIX of 2001), Ss.120(1)(b) & 122(5)---Amendment of deeming assessment on point of levy of Workers' Welfare Fund---Scope---Passing of separate speaking order under S.4 of Workers' Welfare Fund Ordinance, 1979 after proper confrontation to taxpayer would be necessary for levy of such fund---Principles.

2007 PTD 163 ref.

Asif Rasool, D.R. for Applicant.

None for Respondent.

Date of hearing: 24th April, 2011.

2013 P T D (Trib.) 1322

[Inland Revenue Appellate Tribunal of Pakistan]

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

S.T.As. Nos.701/LB, 702/LB of 2011 and F.E.As. Nos.13/LB and 14/LB of 2011, decided on 11th January, 2012.

Sales Tax Act (VII of 1990)---

----S. 34-A---Federal Excise Act (VII of 2005), S.16(4)---S.R.O. 648(I)/ 2011, dated 25-6-2011---Exemption from penalty and additional tax---Default surcharge and penalty orders having been passed against appellant/taxpayer for late deposit of sales tax and special excise duty for relevant tax periods, taxpayer filed appeals before Commissioner Inland Revenue, (Appeals) which was dismissed---Whole of the amount of sales tax and special excise duty, had already been paid by the taxpayer, and it was only the default surcharge and penal amount which was subject matter of appeals filed by the taxpayer---Federal Government, in exercise of powers conferred by S.34-A of the Sales Tax Act, 1990 and S.16(4) of Federal Excise Act, 2005, vide Notification S.R.O. 648(I)/2011, dated 25-6-2011 exempted whole of the amount of default surcharge and penalty payable by a person against whom an amount of sales tax or Federal Excise duty was outstanding or who had failed to pay any amount of sales tax and Federal Excise Duty---Taxpayer had sought support from said notification which had provided amnesty to taxpayers on fulfilment of certain conditions, which was available to him, as he had paid the amount of sales tax and Special Excise Duty before issuance of said notification, and also much before issuance of show-cause notices from the department---Taxpayer, in circumstances was entitled to the benefit of amnesty contemplated in said notification---Impugned orders passed by Revenue Authorities and Commissioner, were set aside---Default surcharges as well the penalty imposed against appellant/taxpayer, were ordered to be remitted in toto, in circumstances.

2006 PTD 336; 2011 PTD 619 and 2003 PTD 593 rel.

Waheed Shahzad Butt for Appellant.

Ishtiaq Ahmed, D.R. for Respondent.

Date of hearing: 11th January, 2012.

2013 P T D (Trib.) 1327

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

Messrs NIAZI BROTHERS, BHAKKAR

Versus

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

S.T.As. Nos.181/IB to 183/IB of 2012, decided on 13th September, 2012.

Sales Tax Act (VII of 1990)---

----S.23---Input tax adjustment claimed against invoices issued by supplier's supplies---Scope---Where such demand was of mysterious nature, then before raising same, interface with affected party would have to be conducted i.e. outreach to supplier's record to prove fact of fraud.

2010 PTD (Trib.) 1631 S.T.A. No. 1334-LB of 2009 dated 25-2-2010 and 2010 PTD (Trib.) 162 S.T.A. No.555-LB of 2009 dated 20-7-2010 rel.

Khurshid Ali Rana for Applicant.

Muhammad Jawad, D.R. for Respondent.

Date of hearing: 13th September, 2012.

2013 P T D (Trib.) 1335

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

PRIME COMMERCIAL BANK LIMITED, LAHORE and others

Versus

COMMISSIONER INLAND REVENUE, L.T.U., LAHORE and others

I.T.As. Nos.4324/LB, 4997/LB to 5000/LB of 2005, 1209/LB, 2125/LB, 2126/LB of 2006, 1268/LB, 1213/LB of 2007, 712/LB, 1154/LB, 916/LB of 2008, 806/LB, 1130/LB, 1236/LB of 2011 and 126/LB, 930/LB, 171/LB of 2012, decided on 7th January, 2013.

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

----S. 122(5)---Amendment of assessment---Pre-requisites---"Definite information"---Scope---Pre-requisites for invoking S. 122(5) of Income Tax Ordinance, 2001 relating to amendment of assessment, were "definite information" with regard to escapement or under-assessment of income; or assessment at too low a rate or subjection of excessive relief; or refund---"Definite information" must have come in the possession of department after completion of assessment---Mere disagreement with the decisions of Higher Courts, could not be termed as "definite information"---Non-issuance of mandatory notice rendered the proceedings untenable in the eye of law---Mere disagreement of legal interpretation, estimating of life of computer software, or having a view that expenditure on such soft-ware was of capital nature, was not "definite information.

2007 PTR 279 (Trib.); 2010 PTD 705 (Trib.); 2013 PTD (Trib.) 246; 2002 PTD (Trib.) 1898; (2002) 85 TAX 245 (Trib.); (2003) 87 TAX 193 (Trib.); (2004) 90 TAX 116 (Trib.); 1993 PTD (Trib.) 472; 2004 PTD (Trib.) 344; I.T.A. No.106/LB/2000; (2004) 90 TAX 116 (Trib.); Collector, Sahiwal and 2 others v. Muhammad Akhtar 1971 SCMR 681; Baby-own v. Income Tax Officer 1997 PTD 47; CIT v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 PTD 1392 = 2009 SCMR 1279; Central Insurance Co. and others v. CBR Islamabad and others 1993 SCMR 1232 = 1993 PTD 766; Saitax Spinning Mills Ltd. v. Commissioner of Income Tax 2003 PTD 808; 2003 PTD (Trib.) 1189; 2006 PTD (Trib.) 356; 2006 PTD (Trib.) 1292 R.A. No.349/LB of 2002; I.T.As. Nos.1012 and 1014/IB of 1995 dated 18-7-2006; CIT v. Oriental Dyes and Chemicals Ltd. 1992 SCMR 763; 2006 PTD 2678; 2005 PTD (Trib.) 2041 and Abu Bakar Siddique and others v. Collector of Customs 2004 PTD 2187 ref.

(b) Words and phrases---

----"May"---Explained.

Abu Bakar Siddique and others v. Collector of Customs 2004 PTD 2187 rel.

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

----S. 124-A---Invocation of S.124-A, Income Tax Ordinance, 2001---Scope---Section 124-A of Income Tax Ordinance, 2001, was aimed at avoiding repetitive appeals on any legal issue on which Tribunal or High Courts had already given a judgment or issue involved was sub judice before the court(s)---No discretion was given to Commissioner, to invoke S.124-A rather an obligation, was imposed to follow the judgment of superior court(s)---Principles.

2012 PTD (Trib.) 1139 = 2011 PTR 165 (Trib.); 2013 PTD (Trib.) 246; 2012 PTD 1055; 2012 PTD 1055 = 2011 PTR 222 (Trib.); 2013 PTD (Trib.) 246 = 2012 PTR 124 (Trib.); Commissioner of Income Tax, Companies Zone I, Karachi v. M.M. Silk Mills Ltd. 2006 PTD 460; 2010 PTD (Trib.) 679; 2006 PTD 354; 2002 PTD 925; 2000 PTD (Trib.) 2668; (2002) 85 Tax 245; 2006 PTD (Trib.) 356; 2005 PTD 2161 (Trib.); 2005 PTD 2599 (H.C. Lah.); 2006 PTD 2678; (2006) PTD (Trib.) 1292; 2005 PTD (Trib.) 2041; 1993 PTD (Trib.) 472; (1972) 86 I.T.R. 38 and (1975) 101 I.T.R. 221 ref.

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

----Ss.13(7), 21(k), 67 & 150---Allowable expenses/deductions---Scope---Assessee, a Bank---Additions---Validity---Expenses incurred on new branches of Bank where buildings were not owned by the Bank, were revenue in nature and were allowable deduction---Advertisement and publicity expenses, were disallowed on the ground that those were capital in nature---Commissioner (Appeals) had rightly deleted the addition with the observation that those expenses were not of enduring nature---Fee paid to Security and Exchange Commission of Pakistan, had no nexus with enhancement of share capital of the Bank and department had misconstrued the facts and misapplied the law---Order of Commissioner (Appeals) deleting the additions was confirmed---Department allowed 10% amortization and disallowed amount---Commissioner (Appeals) disapproved the addition---Order of Commissioner (Appeals) was based on correct interpretation of law---In absence of any infirmity in order of Commissioner (Appeals), same was confirmed by Appellate Tribunal---Substance and not the nomenclature given to any transaction mattered---Liability could not become unascertainable, if it was named as provision---No disallowance could be made on whims---Department could not dictate a taxpayer to conduct a business.

(1999) 79 Tax 538 (SC Ind.); 137 I.T.R. 652; 168 I.T.R. 731; 2005 PTD (Trib.) 2041; 2013 PTD (Trib.) 246; 1984 PTD 4; 2001 PTD 1427; 2001 PTD 744; 2001 PTD 3326; 2006 PTD (Trib.) 356; 2012 PTD 1055; 2012 PTD 1139; Habib Bank v. CIT 2009 PTD 443; (2004) 90 Tax 116 (Trib.) and 2013 PTD (Trib.) 246 ref.

2006 PTD 1800 (Trib.); CIT Central Zone 'A' Karachi v. Phoenix Assurance Co. Ltd. 1991 PTD 1028; 2012 PTD (Trib.) 1055; 2013 PTD (Trib.) 246; 2002 PTD 1; CIT/WT Sialkot Zone v. Messrs Thapur (Pvt.) Ltd. Sialkot 2002 PTD 2112; Taimur Shah v. CIT PLD 1976 Kar. 1030 = 1976 PTD 246; 1992 SCMR 1232; 2002 PTD 1898; 2004 PTD (Trib.) 452 and CIT v. National Foods Laboratories 1992 SCMR 687 = 1992 PTD 570 rel.

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

----Ss. 120 & 171---Refund---For the purpose of S.171(1) of Income Tax Ordinance, 2001, the refund would become due on the date of order treated to have been made under S.120(1) of Ordinance.

2010 PTD (Trib.) 519 rel.

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

----S. 60-A---Workers' Welfare Fund Ordinance (XXXVI of 1971), Preamble [as amended by Finance Act (III of 2006) and Finance Act (I of 2008)]---Chargeability of workers' welfare fund---Provisions of Workers' Welfare Fund Ordinance, 1971 (as amended by Finance Act, 2006 and Finance Act, 2008) being unconstitutional, deletion of the charge of Workers' Welfare Fund was rightly ordered by the department.

E.P.C.T (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 2643 rel.

Dr. Ikramul Haq and Mansoor Beg for Appellants (in I.T.As. No.4324/LB of 2005 and 1268/LB of 2007).

Muhammad Tahir, D.R. for Respondents (in I.T.As. No.4324/LB of 2005 and 1268/LB of 2007).

Muhammad Tahir, DR for Appellants (in I.T.As. Nos. 4997/LB to 5000/LB of 2005, 1209/LB of 2006, 1213/LB of 2007, 2125/LB and 2126/LB of 2006).

Dr. Ikiramul Haq and Mansoor for Beg Respondents (in I.T.As. Nos. 4997/LB to 5000/LB of 2005, 1209/LB of 2006, 1213/LB of 2007, 2125/LB and 2126/LB of 2006).

Dr. Ikramul Haq and Mansoor Beg for Appellants (in I.T.A. No.712/LB of 2008).

Muhammad Tahir, D.R. for Respondents (in I.T.A. No.712/LB of 2008).

Muhammad Tahir, D.R. for Appellants (in I.T.A. No.1154/LB of 2008).

Dr. Ikramul Haq and Mansoor Beg for Respondents (in I.T.A. No.1154/LB of 2008).

Dr. Ikramul Haq and Mansoor Beg for Appellants (in I.T.As. Nos. 806/LB and 1130/LB of 2011, 126/LB and 930 of 2012).

Muhammad Tahir, D.R. for Respondents (in I.T.As. Nos. 806/LB and 1130/LB of 2011, 126/LB and 930 of 2012).

Muhammad Tahir, D.R. for Appellants (in I.T.As. Nos. 916/LB of 2008, 1236/L of 2011 and 171/LB of 2012).

Dr. Ikramul Haq and Mansoor Beg for Respondents (in I.T.As. Nos. 916/LB of 2008, 1236/L of 2011 and 171/LB of 2012).

Dates of hearing: 19th October, and 21st December, 2012.

2013 P T D (Trib.) 1371

[Inland Revenue Appellate Tribunal of Pakistan]

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

C.I.R., ZONE-IV, L.T.U., KARACHI

Versus

Messrs PAKISTAN STATE OIL LIMITED, KARACHI

M.A. (Rect) No.71/KB of 2011 in M.A. (Stay) No.69/KB of 2011, decided in 21st June, 2011.

Income Tax Ordinance (XLIX of 2001) ---

----S. 131(5), proviso---Sales Tax Act (VII of 1990), S.46 (2)---Appeal to Appellate Tribunal---Stay of recovery---Limitation---Departmental Representative contended that Tribunal could grant stay against recovery of tax demand for a period of one hundred and eighty days in aggregate, whereas in the present case one hundred and eighty days had expired and no further stay could be allowed; and that stay order had been allowed without mentioning any period which was against the provisions of law---Taxpayer contended that Tribunal (Accountant Member) confirmed the order of adjudicating authority on three issues while on the fourth issue order-in-original had been set aside by way of remand order; that in contrast Tribunal (Judicial Member) vacated the order on the first three issues and on fourth issue agreed with the Accountant Member; that even if the order of the Accountant Member was taken, there could be no demand arising out of the adjudicating order; that at least on one issue the order had been set aside by way of remand and in the light of view of Judicial Member all of the issues involved had been proposed to be set aside; that rectification application was not maintainable as no demand in law existed which the department was threatening to be recovered; and that rectification application be rejected---Validity---Case of the taxpayer was pending before Appellate Tribunal for no fault of the taxpayer but due to the reason that the final order could not be passed on account of difference of opinion among the Judicial and Accountant Member and the matter was still pending for appointing the referee Member---Both the Members had set aside the matter for fresh consideration on the specific issues, meaning thereby that no demand in law existed and no recovery could be made by the department---Appellate Tribunal directed the department that no coercive action be taken against the taxpayer---Order of Appellate Tribunal was upheld and application filed by the department was dismissed by the Appellate Tribunal.

Malik Waqas Nawaz, D.R. for Appellant.

Muhammad Naseem for Respondent.

Date of hearing: 21st June, 2011.

2013 P T D (Trib.) 1375

[Inland Customs Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Member (Judicial) and Ch. Muhammad Mubeen, Member (Judicial)

Messrs PIONEER STEEL INDUSTRIES (PVT.) LTD., MULTAN

Versus

COLLECTOR OF CUSTOMS, MULTAN and 2 others

C.A. No.252/LB of 2012, decided on 15th April, 2013.

Customs Act (IV of 1969)---

----Ss. 18, 19, 32 & 156(1)---Raw material imported under concessionary notification by misdeclaration of its value---Cognizance of such offence taken by Deputy Director Intelligence and Investigation-FBR, Range Office---Validity---Impugned action taken by the Director was illegal as Intelligence Department was not competent and authorized to take action under S. 32 of Customs Act, 1969---Import documents and GD had been filed at Karachi, where offence of misdeclaration or evasion of tax, if any, took place, thus, Collector of Customs (Adjudication), Multan had no jurisdiction to entertain contravention report or issue show cause notice or pass impugned order---Importing and clearing Collectorate only could take cognizance of evasion of taxes at import stage---Initial action taken by such Director and Collector for being without jurisdiction had rendered entire subsequent proceedings to be ab initio void and of no legal effect---Appellate Tribunal set aside impugned order in circumstances.

2002 SCMR 134; 2001 SCMR 424; 2001 SCMR 1001; PLD 1992 SC 236; Khawaja Waseem v. Superintendent, Intelligence and Investigation-FBR and 2 others C.A. No.603/LB/2009 (2004 PTD 1994); 2005 PTD 23; PLD 1971 SC 124; 2006 SCMR 783; 2007 SCMR 729; 2007 SCMR 1835; 2006 SCMR 1713; PLD 1958 SC 104; PLD 1973 SC 326; PLD 2002 SC 630; 2003 SCMR 59; 2004 SCMR 28; 2004 SCMR 1798; Messrs Capron Overseas' case 2010 PTD 465 and 2004 PTD 2994 ref.

Mansab Ali v. Amir PLD 1971 SC 124; Faqir Abdul Majeed Khan v. District Returning Officer and others 2006 SCMR 1713 and Saeed Farooq v. The State and 2 others 1996 MLD 434 rel.

Mian Abdul Ghaffar for Appellant.

Muhammad Ismail, D.R. for Respondents.

Date of hearing: 3rd April, 2013.

2013 P T D (Trib.) 1385

[Inland Revenue Appellate Tribunal of Pakistan]

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

I.T.As. Nos. 1155/LB to 1157LB of 2011, decided on 18th July, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S. 122---Amendment of assessment---Order passed under Income Tax Ordinance, 1979---Original assessments for the assessment years 1996-97 to 1998-99 were completed under S.60 of (repealed) Income Tax Ordinance, 1979---Said original assessments were amended by invocation of provisions of S.122 of Income Tax Ordinance, 2001---On filing appeal by the taxpayer, Commissioner (Appeals)/Appellate Authority cancelled said amended order---Order of Appellate Authority was upheld by the Tribunal holding that provisions of S.122 of Income Tax Ordinance, 2001, did not have any retrospective effect---No order under subsection (1) of S.66 of repealed Income Tax Ordinance, 1979 would be made after expiry of four years from the date of order sought to be revised---Impugned order passed beyond the period of four years time, was liable to be struck down and was annulled, by Appellate Tribunal, in circumstances.

2005 PTD 1621; Messrs Eli Lilly Pakistan (Pvt.) Ltd.'s case 2009 PTD 1392; 2009 PTD 1392; 2011 PTD (Trib.) 2362; 2012 PTD 964; 1981 PTD 210; 2008 PTD (Trib.) 1641 and 2007 PTD (Trib.) 1203 ref

2011 PTD (Trib.) 2362 rel.

Muhammad Arshad and Waseem Ch. for Appellants.

Shahid Sattar RTO, D.R. for the Respondent.

Date of hearing: 18th July, 2012.

2013 P T D (Trib.) 1396

[Inland Revenue Appellate Tribunal of Pakistan]

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

I.T.As. Nos.38/IB, 136/IB and 138/IB of 2012, decided on 21st May, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 60-A & 122(5-A)---Amendment of assessment---Levy of tax on payment of workers' welfare fund---Disallowance of expenses under head "customs duty"---Amendment was made in the Workers' Welfare Funds Ordinance, 1971, through Finance Act, 2006 and Finance Act, 2008, whereby workers' welfare fund was made payable on the accounting profits of the company, rather than taxable income and, in view of said amendment Taxation Officer, proceeded to charge tax---Taxpayer company filed appeal before Commissioner (Appeals), who remanded the case to Taxation Officer for de novo consideration---Validity---High Court had struck down said amendment, holding the same to be ultra vires the Constitution---Since the very basis of the levy had been knocked off, there was no justification on the part of the First Appellate Authority for de novo consideration, he should have deleted levy of workers' welfare fund---Department had disallowed expenses claimed by taxpayer under the head "Customs Duty" with the finding that expense in question was of 'capital nature'---Commissioner (Appeals), deleted said disallowance with the finding that payment of customs duty was an expense of revenue nature---Findings of Commissioner (Appeals), was maintained, in circumstances---Appeals of taxpayer were accepted and that of the department were dismissed, in circumstances.

East Pakistan Chrome Tannery v. Federation of Pakistan 2011 PTD 2643 rel.

Tahir Khan D.R. for Appellant.

Tahir Razzaque Khan, RCA/AR for Respondent.

Date of hearing: 7th May, 2012.

2013 P T D (Trib.) 1402

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

Messrs SUPER IDEAL SWEETS AND BAKERS, FAISALABAD

Versus

C.I.R. (APPEALS), FAISALABAD

S.T.A. No.656/LB of 2012, decided on 7th March, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7, 11, 13, 33, 34, 40-B & 46---Sales Tax Rules, 2006, Rr.4, 6 & 11---Sales Tax Special Procedure Rules, 2007, Rr.3 & 5---Determination of tax liability in respect of taxable supplies---Department initiated proceedings against appellant/registered person, at his site, and his annual sales had not been properly monitored and recorded by the officials---Department had failed to produce any documentary evidence in support of its claim, showing signature of tax-payers on any document wherefrom it could be gathered that, sales mentioned or alleged in the report were monitored at business premises of the tax-payer; and were related to it ---Annual sales had been worked out on a self devised and self-concocted formula in a mechanical fashion---Said sales had no foundation and basis and had not been recorded in accordance with law---Sales Tax being an indirect tax with its ultimate impact on the consumer, liabilities under Sales Tax Act, 1990, could not be worked out in a fanciful manner based on mere surmises, estimates and conjectures, and by adopting self devised formulas, having no legal support---No break-up of exemption on taxable sales had been provided---Departmental authorities had also erred in according treatment of a manufacturer to the tax-payers for the reason that firstly the Central Registration Office, registered the tax-payer as a "retailer", secondly in view of amendment made in R.3 of Sales Tax Special Procedure Rules, 2007 "manufacturer-cum-retailers" were to be treated under said Rules---Computation of sales and charges of sales tax, was prima facie unlawful, illegal and void ab initio---Since sales had not been properly worked out, and inasmuch as tax having been illegally charged on the basis of Third Schedule of the Sales Tax Act, 1990 the basis for charge of sales tax in the manner of order-in-original, was not sustainable---Orders passed by both authorities below, were declared illegal and order-in-original and order in appeal, were cancelled.

2002 PTD 541 and 2012 PTD (Trib.) 1123 ref.

Khuram Shahbaz Butt for Appellant.

Ms. Fauzia Fakhar, D.R. for Respondent.

Date of hearing: 12th February, 2013.

2013 P T D (Trib.) 1413

[Inland Revenue Appellate Tribunal of Pakistan]

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

Messrs SHAHZAD ENTERPRISES, RAWALPINDI

Versus

C.I.R., R.T.O., RAWALPINDI

I.T.A. No.834/IB of 2012, decided on 16th May, 2013.

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

----Second Sched., Part-III, Cl. (8)---Word "goods"---Definition and kinds stated.

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

----S.113 & Second Sched., Part-III, Cl. (8)---"Fast moving consumer goods"---Characteristics stated.

Sh. Saifullah Waleem for Appellant.

Ehsan Ullah, D.R. for Respondent.

Date of hearing: 16th May, 2013.

2013 P T D (Trib.) 1418

[Inland Revenue Appellate Tribunal of Pakistan]

Before Sohail Afzal, Accountant Member

I.T.A. No.605/LB of 2011, decided on 7th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.114 & 182(1)---Non-filing of annual income tax return within prescribed period---Penalty for such failure of taxpayer, imposition of---Scope---Such penalty would be imposed on basis of tax payable in respect of relevant tax year and could not be levied on basis of tax chargeable---Illustration.

Waheed Shahzad Butt for Appellant.

Dr. Muhammad Idrees, D.R. for Respondent.

Date of hearing: 27th September, 2012.

2013 P T D (Trib.) 1429

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

I.T.As. Nos.1267/LB of 2007, 713/LB, 70/LB, 1097/LB of 2008, 901, 902/LB, 807/LB, 808/LB of 2011, 127/LB of 2012, 5001/LB to 5004/LB of 2005, 1292/LB of 2006 and 127/LB, 170/LB of 2012, decided on 7th January, 2013.

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

----S. 122(5)---Amendment of assessment---Pre-requisites for---Pre-requisites for invoking provisions of S.122(5) of Income Tax Ordinance, 2001, were "definite information" with regard to escapement or under-assessment of income, or assessment at too low a rate or subjection of excessive relief, or refund---"Definite information" must have come in the possession of department after completion of assessment---Mere disagreement with the decision of higher courts, could not be termed as "definite information"---Non-issuance of mandatory notice, rendered the proceedings untenable in the eye of law.

2010 PTD (Trib.) 705; 2013 PTD (Trib.) 246; CIT v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 PTD 1392; Central Insurance Co. and others v. CBR, Islamabad and others 1993 PTD 766 = 1993 SCMR 1232; 2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.); 2003 PTD (Trib.) 1189; 2005 PTD (Trib.) 2041; 2006 PTD (Trib.) 356; (2004) 90 Tax 116 (Trib.); I.T.As. Nos.36 to 38/LB of 2003; Collector, Sahiwal and 2 others v. Muhammad Akhtar 1971 SCMR 681; Baby-own v. Income Tax Officer 1997 PTD 47; Central Insurance Co. and others v. C.B.R., Islamabad and others 1993 PTD 766 = 1993 SCMR 1232; Saitax Spinning Mills Ltd. v. Commissioner of Income Tax 2003 PTD 808; R.A No.349/LB/2002; I.T.A. No.1658/LB of 2003; I.T.As. Nos.1066 to 1073/LB of 2004; I.T.As. Nos.1012 and 1014/IB/1995; 2006 PTD 2678 and CIT v. Oriental Dyes and Chemicals Ltd. 1992 SCMR 763 ref.

(b) Discretion---

----Exercise of---If the statute authorized a person for exercise of discretion to advance the cause of justice that power was not merely optional, but it was the duty of such person to act in the manner it was intended.

Abu Bakar Siddique and others v. Collector of Customs 2004 PTD 2187 rel.

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

----S.124-A---Powers of tax authorities to modify orders---Section 124-A of Income Tax Ordinance, 2001, was aimed at avoiding repetitive appeals on any legal issue on which Tribunal or higher courts had already given a judgment---Section 124-A provided no discretion to Commissioner, rather an obligation was imposed---Very purpose of S.124-A was to avoid repetitive orders/appeals on an issue which was sub-judice before a court.

Abu Bakar Siddique and others v. Collector of Customs 2004 PTD 2187 rel.

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

----S. 29---Bad debts, disallowance of---Scope---If there was no deviation of Prudential Bank Regulations, the claim of bad debt could not be disallowed.

2012 PTD (Trib.) 1139 rel.

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

----S. 23(5)---Initial depreciation on building---Scope---Initial depreciation was extended to all assets, except exclusion provided in clauses (a) to (d) of S.23(5).

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

----Ss. 21(k) & 13---Value of perquisites, computation of---Value of perquisites for the purpose of S.21(k) had to be taken as computed under S.13 of the Ordinance, and not on gross value---Allowance within the exempt limit would fall outside the ambit of S.21(k) of Income Tax Ordinance, 2001.

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

----Ss. 20, 22 & 23---Assets written off---Department disallowed claim of assets written off for want of proper proof---Commissioner (Appeals) accepted appeal of taxpayer with observation that Annual Report, had specifically mentioned the nature of claim---In absence of any reason for interference, order of Commissioner (Appeals) was upheld, by Appellate Tribunal, in circumstances.

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

----S. 20---Amortization of premium on purchase---Scope---Department could not disallow amortization of premium paid by the taxpayer on the ground that same was capital expenditure.

2013 PTD (Trib.) 246 rel.

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

----S. 20---Deduction for compensated absences---Scope---Department could not disallow deduction on provision for compensated absences on the ground that same was only a provision and not an actual expense.

CIT v. Oriental Dyes and Chemicals Co. Ltd. 1992 SCMR 763; CIT v. Civil Aviation Authority 2008 PTD 647 and 2013 PTD (Trib.) 246 rel.

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

----Ss. 20, 21 & 22---Depreciation on vehicle---Scope---Vehicles, in the present case, were provided to employees according to terms and conditions of service---If vehicles were used by the employees partly for their personal use, addition could be made in employees' cases under Income Tax Rules and not in taxpayer's case.

2005 PTD (Trib.) 2041 and 2013 PTD (Trib.) 246 rel.

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

----Ss. 20, 21 & 22---Deduction against other assets---Scope---Department could not disallow deduction for provision against other assets on the ground that it was only a provision and not an actual expense.

2001 PTD 1427; 2001 PTD 744; 2001 PTD 3326; 2013 PTD (Trib.) 246 and 2006 PTD (Trib.) 356 rel.

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

----Ss. 22 & 122(9)---Depreciation, disallowance of---Additional Commissioner made an addition on account of difference of depreciation on addition in building---Said issue was not confronted in notice under S.122(9) of Income Tax Ordinance, 2001---Commissioner (Appeals) disapproved that addition---Held, in absence of any reason, order of Commissioner could not be interfered with.

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

----Ss. 5, 11, 37, 122(5-A) & 150---Allocation of expenses to dividend and exempt capital gain---Scope---Allocation of expenses against dividend and exempt capital gain, was disapproved by Tribunal.

2006 PTD 2678; 2006 PTD (Trib.) 356; (2011) PTR 222 (Trib.); 2013 PTD (Trib.) 246; 2005 PTD (Trib.) 2161 and 2005 PTD 2599 rel.

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

----Ss. 13(7) & 21(k)---Concessionary loans to employees---Department made addition treating concessionary loans as excess perquisites under S.21(k) of Income Tax Ordinance, 2001---Validity---As Taxpayer/Bank having not claimed any expenses, issue of disallowance could not arise---Issue was decided in favour of the taxpayer, in circumstances.

2006 PTD (Trib.) 356 rel.

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

----S. 151---Reversal of provisions for non-performing loans---Department taxed reversal of provisions for non-performing loans treating same as income---Bank (taxpayer) had already offered reversals for tax, when it reduced the charge---Additions were deleted by the Tribunal in circumstances.

(2011) PTR 222 (Trib.); 2013 PTD (Trib.) 246; I.T.A. No.306/LB of 2009 and 2012 PTR 124 (Trib.) rel.

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

----S. 23(1)---Depreciation---Department disallowed depreciation as certain assets such as UPS, furniture fittings, were classified as building, and Commissioner (Appeals) confirmed additions---Plea of Departmental Representative was that building, fittings, computer and furniture etc. were separately classified in Third Schedule of the Ordinance for application of tax depreciation, and same were to be treated accordingly---Tribunal agreed with plea of department and appeal of the taxpayer was dismissed.

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

----S.151(1)(d)---Profit charged on account of re-purchase agreements---Re-purchase agreements, were in fact short term loans obtained by a Bank from another Bank/money market by offering securities as collateral by entering into contract of sale of securities, with simultaneous commitment to repurchase the same---Said arrangement in its essence was a substitute of a similar other method of getting finance; and such arrangement was nothing more than production of a collateral to the bank---Said transaction did fall within the ambit of S.151(1)(d) of Income Tax Ordinance, 2001 that exempts loan agreement between a borrower and a bank---Addition was deleted, in circumstances.

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

----Ss. 122(5) & 233---Amendment of assessment---Deduction of tax on payment of rebate---Rebate was paid to the Bank on purchase of its units and deducted tax---Taxation Officer treated said rebate as 'Commission', and excluded that income from ambit of normal tax regime and taxed it @ 10%---Commissioner (Appeals) confirmed such taxed treatment---Validity---Units were purchased by the Bank for its own investment, and there was no relation of principal and agent---Provisions of S.233 of the Income Tax Ordinance, 2001, were not applicable in the present case---Such kind of treatment did not fall within the ambit of S.122(5) of Income Tax Ordinance, 2001, which resulted in loss of revenue---Transaction was simple by the Tribunal that bank purchased units/shares and NIT allowed rebate on that purchase---Allowing appeal, it was directed by the Tribunal that said income could be taxed under normal tax regime.

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

----S. 100-A & Seventh Sched.---Computation of profits and gains of banking company---Assessment in the case of Bank, was at par with insurance companies taxed under the Fourth Schedule---Seventh Schedule, did not permit re-computation of income---Department could make only permissible addition and adjustment as provided in Seventh Schedule.

CIT Central Zone 'A' Karachi v Phoenix Assurance Co. Ltd. 1991 PTD 1028; (2011) PTR 222 (Trib.); 2013 PTD (Trib.) 246 and 2012 PTD (Trib.) 1055 ref.

2013 PTD (Trib.) 246 rel.

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

----S. 20, Seventh Schedule---Provisions for diminution in value of investment---Deduction---Deductions under head 'provision for diminution in value of investment', were disallowed, and confirmed by Commissioner (Appeals)---Tribunal had confirmed addition under said head for the years prior to insertion of Seventh Schedule, but allowed impairment losses---Deletion of addition was ordered by the Tribunal as years involved, were after the amendment in law rendering the decision relied by the department as "no longer applicable".

2012 PTD (Trib.) 1055; 2013 PTD (Trib.) 246; 2006 PTD 354; 2002 PTD 925; 2000 PTD (Trib.) 2668; I.T.A. No.3819/LB of 1997; I.T.A. No.400/LB of 2000 and 2013 PTD (Trib.) 246 ref.

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

----S. 29---Bad debts---Deletion of amount 'written off'---Additional Commissioner made addition as admissibility of those written off was not proved in terms of S.29 of Income Tax Ordinance, 2001---Commissioner (Appeals) deleted that addition on the ground that said written off were only for disclosure purpose---Since no amount was claimed as 'written off', Commissioner (Appeals), deleted that addition---Expense could only be allowed, if deduction of the same was claimed in the return---Issue was decided in favour of taxpayer and against the department by the Tribunal.

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

----S. 60-A---Workers' Welfare Fund Ordinance (XXXVI of 1971), S.4 [As amended by Finance Act (III of 2006) & Finance Act (I of 2008)]---Chargeability of Workers' Welfare Fund---Amendment in Workers' Welfare Fund Ordinance, 1971 was unconstitutional and order charging Workers' Welfare Fund, was deleted by Tribunal in circumstances.

E.P.C.T (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 2643 rel.

Dr. Ikramul Haq and Mansoor Beg for Appellant.

Muhammad Tahir, D.R. for Respondent.

Dates of hearing: 19th October and 21st December, 2012.

2013 P T D (Trib.) 1600

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheemul Haq Khan, Accountant Member

Messrs TRG PAKISTAN LIMITED, KARACHI

Versus

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

I.T.As. Nos. 661/KB and 786/KB of 2010, decided on 28th March, 2013.

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

----Ss.122(5A) & 210---Amendment of assessment---Powers of Additional Commissioner---Additional Commissioner under delegated authority could perform the function and exercise the powers of the Commissioner with specific reference to S.122(5A) of the Income Tax Ordinance, 2001---Order under S.122(5A) of the Income Tax Ordinance, 2001 was declared legal and within lawful authority by the Appellate Tribunal.

I.T.A. No.370/LB of 2009, dated 16-5-2009 ref.

Writ Petition No.653 of 2009 dated 2-7-2001 and C.Ps. Nos.1664-1665 of 2009, dated 11-9-2009 rel.

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

----Second Sched., Part-I, Cl.(101), Ss.122 (5A), 122(9) & 2(72)---Income Tax Ordinance (XXXI of 1979), Second Sched: Part-I, Cl.(102G)---Securities and Exchange Commission of Pakistan Act (XLII of 1997), S.39(2)---Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003---Venture Capital Companies and Venture Capital Funds Rules, 2000---Venture Capital Companies and Venture Capital Funds Management Rules, 2001---FBR's Circular No.1 of 2006 dated 1-7-2006---Director General's letter dated 30-6-2008---Exemption---Tax year 2003---Return of income claiming exemption from tax under Cl.(101) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 was filed---Taxation Officer observed that exemption was claimed on the basis that the company carried "Venture Project" under the "Venture Capital Company and Venture Capital Fund Rules, 2001", whereas Cl.(101) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 provided that only those Venture Capital Companies would enjoy exemption which were registered under the "Venture Capital Companies and Fund Management Rules, 2000" and according to criteria the case did not qualify for exemption---Validity---Rules referred to in Cl.(101) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 were the "Venture Capital Company and Venture Capital Fund Rules, 2001" which were the duly gazetted Rules be deemed to be in force at the time of introduction of the exemption in the Income Tax Ordinance, 2001---Taxpayer being a company formed under the Venture Capital Company and Venture Capital Fund Rules, 2001 was squarely covered under Cl.(101) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 and qualified for exemption---Clause (101) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 which granted exemption to a Venture Capital Company and Venture Capital Fund did not impose any other condition, set out any criteria or give any authority to the revenue to examine the eligibility of a venture project for the purpose of allowing exemption under the said clause---If the revenue authorities find that the taxpayer violated its mandate as venture capitalist, let such fact be decided by the Security Exchange Commission of Pakistan which was the enforcement agency and empowered to classify the nature and characteristics of business and resultant action in case of any oscillation---Ineligibility of the taxpayer as venture capitalist and its non-recognition as Non-Banking Finance Company or authorization to carry out the business activities should have not been a matter of concern for the Assessing Officer---Claim of exemption of taxpayer was allowed by the Appellate Tribunal.

Interpretation of Indian Statutes by Swarup at page 8; Mozaffar Ahmad v. Anwar Ali PLD 1965 Dacca 296; Government of West Pakistan and another v. Wali Muhammad Habib and another PLD 1961 SC 215; Commissioner of Income Tax v. Nazir Ahmed and Sons (Pvt.) Ltd. 2004 PTD 921; Muhammadi Steamship Co. Ltd. v. The Commissioner of Income Tax, Central Karachi 1966 PTD 664; Pakistan Paper Products v. The Commissioner of Income Tax 2006 PTD 1027; The Commissioner of Income Tax v. Kamran Model Factory 2002 PTD 14 and Commissioner of Income Tax v. National Agriculture Ltd. 2000 PTD 254 ref.

Usman Ali Khan and Faisal Ahad for Appellants.

None for Respondent.

Date of hearing: 28th March, 2013.

2013 P T D (Trib.) 1656

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmed, Accountant Member

M.A. No.210/LB of 2012, decided on 6th March, 2013.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 156, 66A & 13(1)(aa)---Rectification of mistake---Scope---Revenue contended that addition was deleted on the ground that same was made without obtaining approval of the Inspecting Additional Commissioner; and since the order under S.66A of the Income Tax Ordinance, 1979 was passed by the Additional Commissioner Income Tax himself, the approval of higher authority was not required---Validity---Department was seeking rectification of the order on the pleas, which already stood answered by the Appellate Tribunal and Department failed to point any mistake apparent on record, which could be rectified---Scope of rectification was very limited and only those mistakes could be rectified, which were detectable by mere reading of the order without any investigation of new evidence supported by new set of arguments---As no glaring mistake was apparent from the surface of the order, the same did not need rectification and the request made by the department was rejected by the Appellate Tribunal.

1988 PTD 612 ref.

2008 PTD 253 and 2007 PTD 967 rel.

Syed Nasir Ali Gilani for Appellant.

Ms. Fouzia Fakhar, D.R. for Respondent.

Date of hearing: 6th March, 2013.

2013 P T D (Trib.) 1684

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Chairman and Haroon Muhammad Khan Tareen, Accountant Member

C.I.R., R.T.O., ISLAMABAD

Versus

Messrs INTERACTIVE COMMUNICATION (PVT.) LTD., ISLAMABAD

I.T.A. No.854/IB of 2012, decided on 5th March, 2013.

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

----Ss.122 (2), 120-B & 177---Amendment of assessment---Limitation---Tax year 2006---Revenue contended that First Appellate Authority was not justified in annulling the amended assessment order particularly when subsection (2) of S.122 of the Income Tax Ordinance, 2001 was substituted by the legislature; and that period of 5 years had to be recorded from the end of the Financial year in which the Commissioner had issued or treated to have issued the assessment order to the taxpayer within the period of that tax year---Validity---Amendment made in subsection (2) of S.122 of the Income Tax Ordinance, 2001 through Finance Act, 2009 was prospective/restrictive in its application and did not apply to the assessment order passed/issued by the Commissioner up to the tax year 2009 as the substitution, was operative from 1-7-2009---Taxpayer had filed its return on 12-2-2007 which was taken to be assessment order issued to the taxpayer by the Commissioner on the day on which the return was furnished i.e. 12-2-2007, the reckoning period of 5 years, the Commissioner could amend the assessment order by 12-2-2012 whereas amended order had been passed by the Taxation Officer on 29-6-2012 which was hit by limitation and as such not sustainable in the eyes of law being passed beyond the period of limitation i.e. 5 years after passing the assessment order---First Appellate Authority had rightly annulled the amended assessment order which called for no interference.

Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. and others 2009 PTD 1392; Honda Shahra-e-Faisal (AOP) and others v. Commissioner of Income Tax 2005 PTD 1316; Kashmir Edible Oil Limited v. Federation of Pakistan 2005 PTD 1621; United Builders Corporation, Mirpur v. Commissioner of Income Tax 1984 PTD 137; Galaxo Laboratories Limited v. Inspecting Assistant Commissioner of Income Tax 1992 PLD 549; Mrs. Anjum Shaheen v. Inspecting Assistant Commissioner of Income Tax 1993 PTD 1113 and 1232; Monnoo Industries Limited v. CIT 2001 PTD 1525; Messrs Nagina Silk Mills v. I.T.O. 1963 PTD 633; Gulshan Spinning Mills Limited v. Government of Pakistan 1995 PTD 259 and 2008 PTD (Trib) 1146 rel.

(b) Interpretation of statutes---

----Substantive law would always be prospective---Where procedural law close transaction or existing accrued, concluded vested or substantive right, the same would not be retrospective unless and until the statute expressly provided.

Naveed Hassan, D.R. for Appellant.

Umer Rasheed for Respondent.

Date of hearing: 26th February, 2013.

2013 P T D (Trib.) 1705

[Appellate Tribunal Inland Revenue, Lahore]

Before Nazir Ahmad, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs USMAN JAVED ENTERPRISES, FAISALABAD

Versus

CIR (LEGAL DIVISION), FTO, FAISALABAD

S.T.A. No.150/LB of 2013, decided on 2nd May, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 21(2) & 2(14)---Sales Tax General Order No. 35/2012 dated 30-6-2012---De-registration, blacklisting and suspension of registration---Registration was suspended on the ground that the registered person had adjusted input/output against sales/purchases of black-listed/ suspended/non-filer units and supply of goods had not taken place and taxpayer had committed tax fraud---Taxpayer contended that registration was suspended on the basis of presumptions without bringing any material evidence on record and Federal Board of Revenue had issued a uniform policy for suspension and blacklisting of sales tax registered persons; that if the Commissioner was satisfied that a registered person had issued fake invovices, evaded tax or committed tax fraud, suspension of registration shall be through a written order; that Commissioner shall issue a show-cause notice within seven days of the issuance of such order and in case, after giving an opportunity of hearing the offence was established the order of blacklisting shall be issued within 90 days of the issuance of the notice of hearing; that the period of 90 days had already lapsed but no such order was passed by the Commissioner; that suspension was void ab initio and illegal; that blacklisting 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 a last resort after establishing the gross violations of main factors i.e. "(1) if registered person 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"; and that such action of black-listing or suspension of registration and none of the violations of any of the incidences had been established in the present case---Validity---Order of suspension was made on the basis of presumptions without bringing any material evidence on record by the Commissioner---Even the legal requirements as envisaged in Sales Tax General Order No.35/2012 dated 30-6-2012 had not been fulfilled---Suspension order merited cancellation---Show-cause notice and order of suspension were declared void ab initio and were annulled by the Appellate Tribunal.

2012 PTD (Trib.) 337 rel.

Imran Rashid for Appellant.

Ms. Fouzia Fakhar, D.R. for Respondent.

Date of hearing: 23rd April, 2013.

2013 P T D (Trib.) 1723

[Appellate Tribunal Inland Revenue]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheem-ul-Haq Khan, Accountant Member

CIR, RTO, ISLAMABAD

Versus

Messrs DAZZLE GLASS (PVT.) LTD., ISLAMABAD

S.T.As. Nos.92/IB and 93/IB of 2011, decided on 30th June, 2013.

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

----Ss.2 (16), 3, 6, 22, 26, 33, 34 & 36(1)---Federal Excise Act, 2005, Ss.3A, 4, 8 & 19---S.R.O. No.655(I)/2007 dated 29-6-2007---Manufacture or produce---Tool manufacturing---Comparison of sales tax returns with income tax returns---Declaration of lesser amount of sales in sales tax returns---Taxation---Differential amount represented job receipts performed by the taxpayer for other parties i.e. customers---Taxpayer preferred manufacturing job specified by the customer without purchasing the raw-material or selling same by himself---Material was provided by the customer (raw or semi finished), defined jobs performed by the taxpayer and return of goods to the customer for further processing, packing, sale etc.---Job performed by the taxpayer fell in the category of tool manufacturing---Main issue was with regard to the "manufacturing of goods"---Contention of the department was that the taxpayer was indulged in the business of "manufacturing" while the taxpayer's stand was that he was providing "services" and the glass frosting and glass tempering were exempt as it came into the ambit of services, and no tax was leviable on the same---Sufficient material was not produced by the taxpayer to establish its case---Neither basic record/specific initial material was called by the Adjudicating Officer as envisaged under S.22 of the Sales Tax Act, 1990 nor the taxpayer had provided the same for examination---First Appellate Authority had also not thrashed out the case properly and his observations were contradictory---Case was remanded to Adjudication Authority to examine all the materials to be produced before him as prima facie it was apparent that the Adjudicating Officer had neither initiated any enquiry to find out the veracity of the claim of the taxpayer nor any record was called by the Adjudicating Authority---No corroborative evidence was produced by the taxpayer in support of his claim---Taxpayer was directed to produce all the relevant records and evidence in support of his claim---Adjudicating Authority was directed that after affording a reasonable opportunity of being heard decide theissue---Tribunal further directed that Taxation Officer either personally visit the factory premises or depute some one to ascertain whether the taxpayer was indulged in the manufacturing activity or not and then proceed in accordance with law---Effect of remand was of course, in the interest of both the parties as the findings drawn by the authorities below had not been properly investigated---Whole exercise was directed to be completed within two months strictly.

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

----S.2(16)---Manufacture or produce---Manufacturing activities---Series of activity were involved in production process involving material, machine and human skills---Entire manufacturing activities may be done under one roof or at the option of manufacturer, parti-cularly depending upon the nature of manufacturing---Manufacturing activities could be outsourced either fully or partly, in a close location or distinct location---Factors compelling to decentralize or outsource the manufacturing activities completely or any parts thereof was usually cost effectiveness, requiring specialized skill, availability of processing equipments, convenient location, favourable terms of contract or utilization of own performing capacity in more projecting activities and depend on other exigencies of decision making.

(c) Sales Tax---

----Burden of proof---Onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much as condition of taxability as the first, the burden lies on the revenue to show that there is an understatement of the consideration and second condition is fulfilled.

(d) Sales Tax---

----Taxability---If the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.

Hamidullah Shah, D.R. for Appellant.

Ch. Naeemul Haq for Respondent.

Date of hearing: 12th March, 2013.

2013 P T D (Trib.) 1749

[Appellate Tribunal Inland Revenue]

Before Jawaid Masood Tahir Bhatti, Chairperson and Faheem-ul-Haq Khan, Accountant Member

DEFENCE HOUSING AUTHORITY, ISLAMABAD

Versus

CIR, LTU, ISLAMABAD

I.T.As. Nos.929/IB of 2012 and 129/IB of 2013, decided on 30th May, 2013.

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

----Ss.122(9), 122(5), 122(4), 120(3), 111(1)(a)(e), 18(1)(d), 21(c), 32, 35, 39, 174(2) & 177---Amendment of assessment---Amendment of assessment ignoring the revised return---Effect---Returns were filed on 25-1-2010 declaring loss---Later on, returns were revised on 11-8-2010 by increasing the loss---Taxpayer was selected for audit by the Commissioner on 12-10-2012 on the basis of revised return---Taxpayer filed application seeking permission for revising the return again which was allowed on 31-1-2012 and taxpayer revised the return wherein loss was declared---Show Cause Notice was issued on the basis of return filed on 11-8-2012---Subsequently on 19-4-2012 a letter was issued by the Taxation Officer disregarding the approval and revised return and treating same as invalid without fulfilling the requirements of S.120(3) of the Income Tax Ordinance, 2001 and finally amended the order issued on the basis of return filed on 11-8-2012---Validity---Taxation Officer had disregarded the revised return which by fiction of law had been treated as amended assessment order under S.122(3) of the Income Tax Ordinance, 2001---Any intended amendment under S.122 of the Income Tax Ordinance, 2001 should have been made in the latest assessment order in the field---Revision of return had been duly approved before filing the revised e-filing of return---While approving the return for revision the department was well aware that an order under S.177 of the Income Tax Ordinance, 2001 was underway for the last 1-1/2 years and allowing any such revision would culminate the audit proceedings---Allowing the revision by the department and ultimate filing of revised return there was a new amended assessment order under S.122(3) of the Income Tax Ordinance, 2001---Provision of S.114 of the Income Tax Ordinance, 2001 did not restrict the taxpayer for filing a revised return during the audit proceedings and if any revised return was found incomplete that did not become invalid automatically---For passing of an order to frame the assessment of income on the basis of result of audit the department had to keep in mind the concept and procedure of assessment provided under the Income Tax Ordinance, 2001---Under the new scheme of assessment a valid return of income in all the cases of taxpayer was deemed to be an assessment order under the provision of S.120(1) of the Income Tax Ordinance, 2001 on the day it was furnished without there being any exception---In case of a revised return filed under S.114(6) of the Income Tax Ordinance, 2001 same was to be treated an amended assessment order under the provision of S.122(3) of the Income Tax Ordinance, 2001---Revised return filed by the taxpayer for all purposes were the assessment order which included the audit proceedings under S.177 of the Income Tax Ordinance, 2001, amendment under S.122 of the Ordinance---Making an assessment in ignorance to the amended assessment order/revised return by implication of the provisions of S.122(3)(b) of the Income Tax Ordinance, 2001 an amended order on the basis of earlier assessment order could not stay in the field---No justification existed for amending the assessment without considering the revised return filed by the taxpayer---Assessment in the present case was made by ignoring amended assessment in the shape of revised return which had been filed after the prior approval of the department in accordance with law---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer was annulled by the Appellate Tribunal.

Wi Tribe Ltd. v. FBR in ICA 1 of 2012 ref.

2010 PTD 2602 and 2011 PTD 2389 rel.

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

----Ss.214C & 177---Selection of case for audit by the Board---Selection of case for audit by the Commissioner---Scope---Authority of selection of case for audit rested with the Federal Board of Revenue under S.214C of the Income Tax Ordinance, 2001 and that too through a parametric balloting---Selection of cases directly by the Commissioner in the presence of provision of S.214C of the Income Tax Ordinance, 2001 tantamount discrimination and any action taken without lawful authority and super structure built on the basis of fake selection was illegal---Case of the taxpayer was selected for audit in October, 2010 and at that time the law had already been amended by including S.214C of the Income Tax Ordinance, 2001 through Finance Act, 2010 effective from June 5, 2010---Selection of the case for audit invoking the provision of S.177 of the Income Tax Ordinance, 2001 was totally illegal and without lawful authority.

Messrs Chen One Stores Ltd. v. FBR in Writ Petition No.393 of 2011; 2012 SCMR 597 = 2012 PTD 693 and Messrs Farooq Saeed Khan v. CIR(A) in I.T.A. No.933/LB of 2011 rel.

Syed Tauqeer Bukhari, Syed Tanseer Bukhari and Mudassar Khalid, ACA for Appellants (in I.T.A. No.929/IB of 2012).

Tahir Khan, D.R. for Respondent (in I.T.A. No.929/IB of 2012).

Tahir Khan, D.R. for Appellant (in I.T.A. No.129/IB of 2013).

Syed Tauqeer Bukhari, Syed Tanseer Bukhari and Mudassar Khalid, ACA for Respondents (in I.T.A. No.129/IB of 2013).

Date of hearing: 30th May, 2013.

2013 P T D (Trib.) 1764

[Appellate Tribunal Inland Revenue, Lahore]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzafar, Accountant Member

Messrs RICE EXPORTERS ASSOCIATION OF PAKISTAN (REAP), LAHORE

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, LAHORE

I.T.As. Nos. 426/LB to 429/LB of 2013, decided on 29th May, 2013.

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

----S.124(2)---Assessment giving effect to an order---Limitation---Taxpayer contended that after decision by the Appellate Tribunal, case had not been finalized within the period stipulated in S.124(2) & S.124(4) of the Income Tax Ordinance, 2001 as last date to finalize the case under S.124(2) of the Income Tax Ordinance, 2001 was 30-6-2012 while the order of the Deputy Commissioner Inland Revenue had been delivered to the post office on 12-7-2012 and that order passed on file but not communicated to the concerned party, could not be termed as having been passed within the prescribed period---Validity---Interpretation of legal provisions relating to issuance of order after the expiry of period of limitation under S.124(2) of the Income Tax Ordinance, 2001 was not convincing---Deputy Commissioner had shown the date of issuance of the order as 30-6-2012 and the sanctity attached to the performance of duties during the ordinary course of working by the government functionaries belied the contention of the taxpayer---Appellate Tribunal held that case had been finalized by the Deputy Commissioner within the period stipulated in the Income Tax Ordinance, 2001.

Messrs Dandot Cement Company Ltd., Lahore v. Secretary Revenue Division, Islamabad 2008 PTD 609 ref.

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

----S.124 (4)---Assessment giving effect to an order---Limitation---Direct relief---Taxpayer contended that Appellate Tribunal provided direct relief but the appeal effect order had not been passed within 2 months period as stipulated in S.124(4) of the Income Tax Ordinance, 2001; that where a statute provided time limit during which tax liability could be created against a taxpayer the prescribed period was mandatory; and orders passed beyond the prescribed period were void---Validity---Reliance by the taxpayer on S.124(4) of the Income Tax Ordinance, 2001 was mistaken because said legal provision related to a case where direct relief had been provided by the Appellate Tribunal or First Appellate Authority---Perusal of order of Appellate Tribunal and that of First Appellate Authority revealed that direct relief had not been provided to the taxpayer, rather, this was a case of re-assessment of tax liability---Section 124(4) of the Income Tax Ordinance, 2001 was not applicable in the facts and circumstances of the case.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Central Board of Revenue and another 2008 PTD 60; Commission Inland Revenue v. Messrs Crescent Textile Mills and others 2012 PTD 1092 Messrs Pakistan Ordinance Factories (POF) Wah, Cantt. v. Collector of Customs, Sales and Excise (Adjudication) Islamabad 2012 PTD 1016 ref.

(c) Income Tax---

----Proration of expenses---Exempt income of voluntary contribution---Taxable income from Rice inspection---Taxpayer contended that proration of expenses was not a valid concept and specific expenses should be allocated to the respective sources of receipt; that voluntary contribution simply entailed receipt of cheques and deposit thereof in the bank; and that huge expenditure could not be related to the simple collection of voluntary contribution involving only receipt of cheques and deposit of the same in the bank---Validity---Main function of the taxpayer was inspection of rice and the extent of this mammoth exercise relating to certification of quality of rice could be very well comprehended---Department failed to rebut the contention of the taxpayer that collection of voluntary contribution simply entailed receipt of cheques and depositing the same in banks---Rupees 15,10,894 and Rs.2,549,505 could not be spent for collection of Rs.2,200,500 and Rs.1,900,000 respectively---Keeping in view overall facts of the case, working of the organization, the nature of voluntary contributions and rice inspection and affidavits submitted by the Secretary General of the taxpayer, it was ordered that the expenses claimed relating to voluntary contributions be allowed.

2005 PTD 2161 (Trib.) rel.

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

----S. 205---Default surcharge---Welfare organizations---Taxpayer contended that in non-profit organization, no individual gains or any monetary benefit by evasion or non-payment of taxes was involved; and that ordinarily the mens rea or guilty intention could not be attributed to welfare organizations---Validity---Taxpayer had declared "NIL" income for the reason that receipts on various counts were considered by it to be exempt from levy of tax---Levy of default surcharge/ additional tax was not tenable in this case.

D.G. Khan Cement Company Ltd. v. Federation of Pakistan 2004 PTD 1179 and CIT, B-Zone, Lahore v. L.C.C.H.S., 2002 PTD 629 rel.

Hussain Ahmad Sherazi for Appellant.

Dr. Istiaq Ahmad, D.R. for Respondent.

Date of hearing: 24th April, 2013.

2013 P T D (Trib.) 1773

[Appellate Tribunal Inland Revenue, Lahore]

Before Syed Nadeem Saqlain, Chairperson and Mian Masood Ahmad, Accountant Member

Messrs SECCO PAK (PVT.) LTD., LAHORE

Versus

CIR (APPEAL-II), RTO, LAHORE

S.T.A. No.96/LB of 2012, decided on 14th May, 2012.

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

----Ss. 10, 4(a) & Fifth Sched., S.No.4---Sales Tax Rules, 2006, Chapter VII (Rr.40 to 50)---S.R.O. 549(I)/2008 dated 11-6-2008, S.Nos.3 & 7---Refund of input tax---Zero rated supplies---Taxpayer manufactured "shelter houses" which were supplied to those companies which had been awarded contract by the Government of Pakistan to establish "Clean Drinking Water Facilities for All" against international tenders---Taxpayer issued zero rated invoices while supplying subject shelter houses as supplies relating to international tenders and claimed refund of sales tax paid as input tax on the materials/goods purchased for manufacturing the shelters houses---Refund claim was not approved--Taxpayer contended that shelter houses had been supplied for establishment of "Clean Drinking Water Facilities for All" by the two recipients of such supplies who had been awarded contract under international tenders and the supplies of shelter houses were zero rated---Department contended that the taxpayer was not the original awardees of the contract by the Government of Pakistan and being sub-contractor, was not eligible to claim refund with reference to zero-rated sales tax facility; and taxpayer had not complied with the relevant rules relating to international tenders under Sales Tax Rules, 2006---Validity---Refund claim related to the input tax paid on the raw material and goods which had been used for the manufacturing of shelter houses---Such shelter houses had been supplied on the basis of zero rated invoices and used as integral part of Clean Drinking Water plants---Contract for "Clean Drinking Water Facilities for All" had been awarded by the Government of Pakistan on the basis of international tenders---Sales tax in Pakistan is essentially a value added tax and its burden was ultimately passed on to the consumer---Under the zero rating scheme, sales tax was not payable/refundable where the end consumer is not to be burdened with this levy---"Clean Drinking Water Facilities for All" related to a social welfare measure aimed at improving the general health of the society and the project had been zero rated---Taxpayers' supplies of shelter houses were zero rated supplies---Taxpayer's refund claim was also covered by S. Nos. 3 and 7 of S.R.O. 549(I)/2008 dated 11-6-2008---Assessment order and order-in-original was annulled by the Appellate Tribunal and refund claims directed to be paid to the taxpayer.

Order-in-Appeal No.419 of 2000; Appeals Nos. 95/ST/IB/2006 and 96/IB of 2006 and Messrs M.R. Electric Concern (Pvt.) Ltd., v. The Collector Sales Tax Rawalpindi Appeal No.419 of 2000 ref.

Aisha Steel Mills (Pvt.) Ltd. Karachi and others v. Federation of Pakistan through Secretary Revenue Division/Chairman Federal Board of Revenue Islamabad and others 2011 PTD 569 and Caltex Oil (Pakistan) Ltd., v. Collector of Excise and Sales Tax 2005 PTD 480 rel.

(b) Sales Tax Rules, 2006---

----Chapter VII (Rr.40 to 50)---Zero-rating of supplies against Inter-national Tender for Afghan Refugees---Mutatis mutandis application of---Rules contained in Chapter VII titled as "ZERO-RATING OF SUPPLIES AGAINST INTERNATIONAL TENDER FOR AFGHAN REFUGEES" of the Sales Tax Rules, 2006 were basically meant for aid supplied to Afghan refugees and these can only be applied mutatis mutandis to other international tenders---For instance, if a contract by the Government of Pakistan was awarded in Pakistan Currency and the payment was also made in Pakistan Currency condition relating to documentary evidence as to payment in foreign currency under R.64(ii) Sales Tax Rules, 2006 could not be made applicable.

(c) Sales Tax---

----"Plant and machinery"---Pre-fabricated buildings and sheds were integral part of "plant and machinery".

Aisha Steel Mills (Pvt.) Ltd. Karachi and others v. Federation of Pakistan through Secretary Revenue Division/Chairman Federal Board of Revenue Islamabad and others 2011 PTD 569 rel.

Hussain Ahmad Sherazi for Appellant.

Yasir Pirzada, D.R. for Respondent.

Date of hearing: 14th May, 2012.

2013 P T D (Trib.) 1796

[Appellate Tribunal Inland Revenue]

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

Messrs GUJRAT PRE-CASTING INDUSTRIES, GUJRAT

Versus

C.I.R. (ZONE-II), RTO., SIALKOT

S.T.A. No.181/LB of 2012, decided on 26th March, 2012.

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

----S.13(1) & Sixth Sched.---S.R.O. No.655(I)/2007---Exemption---Cement Blocks---Girders, slabs and boundary wall---Cement blocks appearing at S.No.35 of the Sixth Schedule to the Sales Tax Act, 1990 were exempt from the levy of sales tax---Building Blocks of cement falling under heading 6810.1100 and Building Blocks of cement including ready mix concrete blocks were exempt from sales tax---Special Excise Duty was also not applicable vide S.No.32 of the Table of S.R.O. No.655(I)/2007---Department alleged after issuance of show cause notice that the taxpayers were manufacturing girders, slabs and boundary wall columns of different sizes---Heading No.6810.1100 showed that those articles which were used in the erection of building fell under heading 6810.1100 and articles falling under heading 6810.9100 were used after the erection of building---Girders slabs and boundary wall columns were used in the erection of building---Girders, slabs, boundary wall columns etc. were building blocks out of which building was erected and correctly fell under heading 6810.1100 and were exempt from sales tax and special excise duty.

Collins Concise Dictionary of the English Language and Chambers Combined Dictionary Thesaurus ref.

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

----S.11---Assessment of tax---Show cause notice---Pre-casting goods---Manufacturing of girders, slabs and boundary walls---Taxpayer contended that show cause notice had alleged as having supplied pre-casting goods but later on the Department changed their stance and alleged that the taxpayer supplied girders, beams and building wall columns; and Adjudicating Authority went beyond the scope of the show cause notice and that Department did not restrict the specific allegation stated in the show cause notice rather took a new stand which was not incorporated in the show cause notice which was not lawful---Validity---Order-in-original was passed on the ground, which was not mentioned in the show cause notice and thus was illegal and void.

1987 SCMR 1840 rel.

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

----Ss.11 & 22---Assessment of tax---Concealment of purchases and sales---Record was taken into possession by the department from the premises of taxpayer but despite that it was alleged that the taxpayer intentionally and deliberately concealed the purchase and sales---Allegation was disproved by the facts of the case as there was no concealment and there was no proof of tax fraud---Appeal was accepted and both order-in-appeal and order-in-original were set aside by the Appellate Tribunal.

Tariq Najib for Appellant.

Yasir Pirzada, D.R. for Respondent.

2013 PTD (Trib.) 1800

[Appellate Tribunal Inland Revenue]

Before Muhammad Nawaz Bajwa, Judicial Member and Abdul Rauf, Accountant Member

Messrs MAPLE LEAF CEMENT FACTORY LTD., LAHORE

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.340/LB of 2009, decided on 22nd September, 2012.

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

----Ss.8(4), 33 & 34---Sales Tax General Order No.10 of 1998---Tax credit not allowed---Second unit was got registered separately under some misconceived notion---Both units were supplied electricity from one connection---Claim of adjustment of sales tax on the electricity bills of Phase-II against the output tax of Phase-I was violative of S.8(4) of the Sales Tax Act, 1990---Validity---Second registration in respect of Phase-II was sought and accorded by the department under misconceived notion of law and was of no significance at all---Federal Board of Revenue vide Sales Tax General Order No.10 of 1998 had issued necessary clarification, the taxpayer approached the concerned Collectorate for cancellation of second registration and also sent a number of letters/reminders to the concerned authorities---Such letters remained unattended for quite some time with the result that the registered person had to approach the Member Sales Tax for cancellation of second registration and ultimately second registration was cancelled---Registered person was well within its right to claim the adjustment of input tax paid in respect of Phase-II unit and there was no legal infirmity in the claim---Appellate Tribunal directed that the registered person be treated as one business concern for the purpose of adjustment of input tax, as a consequence additional surcharge and penalty on account of disallowance of adjustment was also deleted.

2000 PTD 1296 rel.

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

----Ss.34 & 33---Additional tax---Adjustment of sales tax charged through electricity bills---Revenue pointed out that input tax paid along with electricity bills was adjusted immediately on receipt of the bills whereas the said adjustment could be lawfully claimed only after the payment of the bill and charged additional tax---Taxpayer contended that at the time of filing of returns there was a confusion whether adjustment of input tax was to be made with reference to the date of issuance of electricity bill or the date of payment of bill; and when Federal Board of Revenue had clarified that the adjustment of input tax could be claimed only after making the payment of electricity bill, the adjustment was claimed in accordance with such instructions; and irregular adjustment of input tax before the actual payment of electricity bill was just a procedural and inadvertent lapse which did not attract the penal provisions of law---Validity---Adjustment of input tax made by the taxpayer under misconception of law did not render it liable to additional tax or penalty---Appellate Tribunal directed deletion of additional tax charged on account of irregular adjustment of input tax.

Layya Sugar Mills's case GST 2004 CL 318 rel.

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

----Ss.8, 33 & 34---Tax credit not allowed---Canteen and administrative offices---Sales tax attributable to consumption of electricity on non-taxable activities i.e. running canteen and administrative offices etc. was disallowed being not related to taxable activity---Validity---Since offices and canteen etc. in respect of which input tax had been claimed were located within the factory premises of the taxpayer; and contributed to the smooth running and efficiency of the business and as such they were to be treated as integral part of the business---Taxpayer was entitled to the adjustment of input tax paid on electricity consumed in the running canteen and administrative offices located within the factory premises.

2005 PTD (Trib.) 1358 and 2006 PTD (Trib.) 196 rel.

Malik Ahsan Mehmood for Appellant.

Muhammad Tahir, D.R. for Respondent.

2013 P T D (Trib.) 1807

[Appellate Tribunal Inland Revenue]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

Messrs I.M. STEEL INDUSTRIES, LAHORE

Versus

C.I.R., ZONE-IV RTO, LAHORE

S.T.A. No.1202/LB of 2012, decided on 26th February, 2013.

Sales Tax Act (VII of 1990)---

----S.21(2)---De-registration, blacklisting and suspension of registration---Blacklisting had followed the suspension of registration which was subject matter of appeal before Appellate Tribunal and appeal was disposed of whereby suspension order and subsequent proceedings were set aside---Taxpayer contended that Revenue's order having been passed in pursuance of earlier suspension order squarely covered within the meaning of term "subsequent proceedings" as used by the Appellate Tribunal in its order; and blacklisting order should be declared illegal resulting in restoration of registration---Validity---Edifice built upon unlawful foundations had to crumble down---Appellate Tribunal had already declared the suspension of registration as unlawful, the blacklisting having been done pursuant to the suspension of registration was to meet its fate of cancellation and Appellate Tribunal ordered accordingly.

Miss Nida Malik, ITP for Appellant.

Ms. Fauzia Fakhar, D.R. for Respondent.

2013 P T D (Trib.) 1953

[Appellate Tribunal Inland Revenue, Lahore Bench]

Before Jawaid Masood Tahir Bhatti, Chairman and Muhammad Akram Tahir, Accountant Member

Messrs JARIT INTERNATIONAL, SIALKOT

Versus

COMMISSIONER INLAND REVENUE, GUJRANWALA

S.T.As. Nos.702/LB and 703/LB of 2012, decided on 8th April, 2013.

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

----S.36---Recovery of tax not levied or short-levied or erroneously refunded---Recovery of refunded amount without show cause notice---Validity---Provision of S.36 of the Sales Tax Act, 1990 empowered to recover the amount "erroneously refunded"---Action under said section could not be taken unless the taxpayer had been served with a show cause notice within a period of five years of the "relevant date", which, according to Cl.(b) of subsection (4) of S.36 of the Sales Tax Act, 1990 was "the date of refund"---Show cause notice under S.36(1) of the Sales Tax Act, 1990 had admittedly not been served upon the taxpayer, neither Adjudicating Authority ever assumed jurisdiction to make the order-in-original---First Appellate Authority had no jurisdiction to uphold the order-in-original in circumstances---Court was bound to weigh conflicting evidence and to draw its own inferences and conclusions in order to administer substantial justice---First Appellate Authority had turned a deaf ear to the assertions of the taxpayer, and had failed to take notice of departmental illegalities---First Appellate Authority ought to have acted as an unbiased and impartial umpire, otherwise it would be very hard to escape from the allegation of mala fides---When an illegal action will flow from a public functionary, same would certainly be tainted with mala fide.

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

----S.45B---Appeal---Decision of appeal---Limitation---Extension of limitation period by the Federal Board of Revenue---Validity---Provisions of S.45B of the Sales Tax Act, 1990 prescribed a period of 120 days for decision of appeal, which could be extended by 60 days for reasons to be recorded in writing and no further extension was allowed---Appeals, in the present case, were admittedly filed on 14-6-2011 which ought to have been adjudicated upon by 12-10-2011---Said period could have been extended by 60 days i.e. up to 12-12-2011---No extension beyond such period was permissible---No provisions of Sales Tax Act, 1990 and the Rules allowed the Federal Board of Revenue to extend the period prescribed by the 1st and 2nd provisos to S.45-B of the Sales Tax Act, 1990---Without there being any enabling provision, the extension allowed by the Federal Board of Revenue could not be permitted---No reason existed for delaying the rendering of decision by the First Appellate Authority for about six months when the appeal had been finally heard on 21-12-2011---Such a delay could not be ignored which smacked that mala fide as imputed by the taxpayer in his affidavit, which Appellate Tribunal refrained to comment upon, there being other administrative authorities for taking cognizance of such glaring maladministration.

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

----S.36---Recovery of tax not levied or short-levied or erroneously refunded---Subsequent black-listing of suppliers---Refund---Recovery of---Validity---Action of Sales Tax Department to recover the amount of tax refunded to the taxpayer due to subsequent black-listing of any of his suppliers did not find any support from any provision of Sales Tax Act, 1990 and Rules made thereunder---Demands raised through order-in-original were held to be void ab initio, illegal and without authority and was annulled by the Appellate Tribunal and order-in-appeal was vacated.

GST 2002 CL 270; 2003 PTD 1257; 2001 SCMR 838; PLD 1989 Lah. 47; 2003 PTD 1797; NTR 1990 SC 1; 1993 PTD 697; 2000 PTD (Trib.) 329; 2004 PTD (Trib.) 1052; 2007 PTD 1560; 1992 PTD 671; 1991 PTD 217; 1995 PTD 268; NTR 1999 Trib. 46; 2001 PTD (Trib.) 3810; 2003 PTD (Trib.) 1158; 2007 PTD 1982; 2011 PTD (Trib.) 791; 2011 PTD (Trib.) 808; 2003 PTD 63; 2005 PTD 1390; 2004 PTD 1893; 2004 PTD 1659; 2004 PTD 2845; 2004 PTD 1805; 2007 PTD 1982; 2011 PTD (Trib.) 773 and Appeal Nos. S.T.As. Nos.73 to 75/LB of 2008, dated 21-5-2011 ref.

2011 PTD (Trib.) 2347 rel.

Syed Ali Imran Rizvi for Appellant.

Ms. Sadia Sadaf, D.R. for Respondent.

Date of hearing: 7th March, 2013.

2013 P T D (Trib.) 2130

[Appellate Tribunal Inland Revenue, Lahore Bench]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sabiha Mujhid, Accountant Member

Messrs SIDDIQUE ENTERPRISES, FAISALABAD

Versus

C.I.R. (APPEALS), R.T.O. FAISALABAD and others

M.A. (A.G.) 50/LB of 2013 and S.T.A No.861/LB of 2012, decided on 29th August, 2013.

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

----S. 46---Appeal before Appellate Tribunal---Appellant's application for allowing him to raise additional legal grounds in memo. of appeal not raised therein earlier due to inadvertence, mistake and error---Validity---Law neither debarred appellant from raising additional grounds nor restrained Appellate Authority/Tribunal from entertaining same---Appellant could raise any new or additional legal ground for first time before Tribunal even though not raised either in memo. of appeal before Tribunal or Appellate Authority or at stage of adjudication proceedings---Tribunal would be bound to entertain any new legal ground and render decision thereon as its disallowance would result in injustice---Tribunal allowed appellant to argue additional legal grounds along with grounds already raised in memo of appeal.

Messrs Haji Mehr Din v. Commissioner of Income Tax, Lahore 2002 PTD 541; Messrs Amtex Ltd, Faisalabad v. C.LR (R.T.O), Faisalabad PTD 2011 (Trib.) 1140 and Messrs Naseem Plastic House, Faisalabad v. C.I.R. (RTO), Faisalabad" 2012 PTD (Trib.) 1335 rel.

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

----Ss. 11(2) & 36(1)---S.R.O. No.594(I)/2012 dated 1-6-2012---Show cause notice issued by DCIR for recovery of sales tax on basis of income tax return filed by taxpayer---Passing of adjudication order by Officer of Inland Revenue---Validity---According to S.R.O. 594(I)/2012, dated 1-6-2012, DCIR and Officer of Inland Revenue had no power to adjudicate cases involving pecuniary amount of more than Rs. 500,000 and Rs. one Million respectively---Impugned show-cause notice and consequent adjudication order were, illegal and without jurisdiction in circumstances.

Messrs Chenab Board, Faisalabad v. CIR(A), R.T.O. Faisalabad 2013 PTD (Trib.) 316 rel.

(c) Jurisdiction---

----Non-fulfilling of mandatory conditions for exercise of jurisdiction would render entire proceedings illegal---Principles.

If mandatory conditions for exercise of jurisdiction by an Authority, Tribunal or Court are not fulfilled, then the entire proceedings which followed became illegal and suffered from want of jurisdiction. Any order passed in continuation of these proceedings in appeal or revision equally suffered from illegality and was without jurisdiction.

(d) Public functionaries---

----Law would favour actions taken by an authority within ambit of his statutory powers, but not otherwise---Principles.

Law favours actions of the authorities to be confined to their own spheres of jurisdiction conferred by the statute.

Any action taken by a tax functionary beyond the ambit of his jurisdiction is a nullity and without jurisdiction.

Messrs Chenab Board, Faisalabad v. CIR(A), R.T.O. Faisalabad 2013 PTD (Trib.) 316 and Faqir Abdul Majeed Khan v. Distt. Returning Officer and others 2006 SCMR 1713 rel.

(e) Taxation---

----Tax functionary---Action taken by a tax functionary, if beyond ambit of his jurisdiction, would be a nullity and without jurisdiction.

Messrs Chenab Board, Faisalabad v. CIR(A), R.T.O. Faisalabad 2013 PTD (Trib.) 316 and Faqir Abdul Majeed Khan v. Distt. Returning Officer and others 2006 SCMR 1713 rel.

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

----Ss. 32 & 36(1)---Issuance of show-cause notice by DCIR, while passing adjudication order by Officer of Inland Revenue---Validity---DCIR being an officer of higher rank had initiated adjudication proceedings by issuing show-cause notice to taxpayer, whereas Officer of Inland Revenue being an officer of lower rank had concluded proceedings by passing impugned order---Officer of Inland Revenue could not exercise powers of DCIR through delegation or otherwise---Adjudication proceedings carried out by Officer of Inland Revenue and passing of impugned order was, illegal and without jurisdiction.

(g) Jurisdiction---

----Jurisdiction vesting in higher-rank-officer in a case could not be exercised by an officer-lower-in-rank, in absence of express provision in statute to the contrary---Principles.

Where a superior and higher rank authority is exercising its jurisdiction in a case, exercise of jurisdiction by a subordinate authority having lower in rank in that case is barred in the absence of any express provision in the statute to the contrary.

Where a higher rank authority has put his hands to proceed with a case, any attempt by any other authority with lower rank to take cognizance of such matter or to institute proceedings would render the cognizance and proceedings illegal and void ab initio as an authority of lower rank willing to deal with a matter must possess the jurisdiction to deal with the same if such authority of lower rank does not have that power, the initiation of entire proceedings are liable to be quashed being illegal, ab initio void and coram-non-judice and whatsoever proceedings in its consequences by way of order-in-appeal shall also become illegal and without jurisdiction.

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

----Ss. 2(39)(41)(46), 3, 22, 25, 36(1), 38(3) & 38-B(3)---Assessment of sales tax on basis of record/data of income tax return filed by registered person for same financial year---Validity---Income tax return including financial statements of a registered person was neither specified as sales tax record under S. 22 or any other provision of Sales Tax Act, 1990 nor was he legally bound to produce record of income tax return in response to show cause notice issued to him under S. 25 thereof---Officer of sales tax authorised by Federal Board of Revenue or Commissioner, though under law could get information of taxes from other Revenue Divisions for purposes of inquiries or investigations, but none of them could use data provided by registered person in his income tax return for creating thereon his sales tax liability---Sales tax under S. 3 of Sales Tax Act, 1990 could be imposed on basis of taxable supplies made by a registered person in Pakistan in furtherance of any taxable activity carried out by him and on goods imported by him, but not on basis of assumption, presumption or intendment---Nothing on record was available to prove that amount shown in income tax return of registered person was linked with taxable supplies or taxable activities or represented an amount on account of any business activity---Data of income tax return could be used to determine correctness of data provided by registered person in sales tax return, but same could not be used for calculating sale tax liability against him---Impugned assessment of sales tax was illegal---Principles.

Messrs Al-Hilal Motors Stores and others v. The Collector, Sales Tax and Central Excise (East) Karachi and others 2004 PTD 868 and Muhammad Siddique and others v. Deputy Collector Excise and Taxation, Sales Tax Officer, Mirpur and others 1990 PTD 1088 rel.

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

----Arts. 117 & 118---Party making an allegation would be bound to prove the same---Law would not permit an action not based on evidence.

(j) Taxation---

----No room for any intendment or presumption as to tax.

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

----S.36(1)(2)---Show-cause-notice under S. 36(1) of Sales Tax Act, 1990, issuance of---Absence of any allegation or specific charge of collusion or deliberate act in such notice against registered person or any material confirming such charge---Validity---Show cause notice being a fundamental document must contain complete case with supportive evidence against registered person---Mere mentioning of S.36(1) of Sales Tax Act, 1990 or words "deliberate act" or "collusion" in show cause notice would not vest authority with jurisdiction to invoke such provision---Impugned notice did not show that alleged act of non-payment of sales tax by registered person was result of collusion or his deliberate act to deceive Government---Burden to prove allegation of collusion or deliberate act would lie on department by showing that registered person by reason of some collusion or deliberately acted for non-payment of sales tax---Such notice for want of necessary particulars was defective and illegal---Proceedings carried out on basis of impugned notice including subsequent orders passed on its basis would be illegal and without jurisdiction---Principles.

Messrs Caretex v. Collector of Sales Tax and Federal Excise and others 2013 PTD 1536; Messrs Inam Packages, Lahore v. Appellate Tribunal Customs, Central Excise and Sales Tax, Custom House, Lahore and 2 others 2007 PTD 2265; Assistant Collector Customs and others v. Messrs Khyber Electric Lamp and others 2001 SCMR 838 and Messrs Usman Fabrics Pakistan, Faisalabad v. Collector of Sales Tax, Faisalabad 2010 PTD (Trib.) 1631 rel.

(l) Administration of justice---

----When law specifies a particular manner and procedure then it is obligatory for the functionary of the State to adhere to the same and comply with it in all respects and any negligence, failure or omission to do so invalidates the proceedings on account of which whole superstructure raised on such defective foundation automatically crumbles down.

(m) Taxation---

----No body could be burdened with tax without providing him fair opportunity of hearing---Principles.

A person being impeded and penalized with financial burden of taxes must be provided a complete and comprehensive charge-sheet with all evidences in the show-cause-notice, which he could reply and defend as in the financial statutes, money after all does matter.

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

----S.24-A---Judicial Order---Order passed by adjudication authority without assigning reasons and discussing all issues raised by parties---Validity---Such order for being non-speaking and sketchy did not meet requirements of a judicial order, which must contain contentions of rival parties and its reasoning based on evidential substance---Illustration.

(o) General Clauses Act (I of 1894)---

----S. 24-A---Speaking order, passing of---Duty of adjudication authority stated.

An authority exercising statutory powers of adjudication or appeal affecting valuable rights of the parties act as quasi judicial authority and while exercising these powers must pass a speaking order duly supported by reasoning showing due application of mind to facts as well as law applicable. Any order lacking such criteria is not only illegal and without lawful authority, but also of no legal effect.

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

----Ss. 2(37) & 36(1)---Tax fraud by taxpayer, charge of---Burden of proof---Department would be bound to discharge initial burden to prove attraction of provisions of tax fraud, otherwise such charge would have no legal consequences---Illustration.

Khubaib Ahmad (Taunsvi) for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondents.

Date of hearing: 29th August, 2013.

2013 P T D (Trib.) 2148

[Inland Revenue Appellate Tribunal, Lahore Bench]

Before Muhammad Waseem Ch., Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs PAK ARAB FERTILIZERS LTD. LAHORE

Versus

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

M.A. (Cond.) Nos.10/LB of 2013 and 66/LB of 2012, decided on 5th July, 2013.

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

----S.45B---Appeal---Limitation---Condonation of delay---Order-in-original was served on 20-5-2012 and appeal before Appellate Tribunal was to be filed up to 19th July, 2012 i.e. within 60 days of the receipt of the order---Taxpayer instead of preferring appeal before Appellate Tribunal within the stipulated period as warranted under law, filed appeal before First Appellate Authority on 13-6-2012---First Appellate Authority, on having on 10-7-2012 clarified that he had no jurisdiction to entertain the appeal---Taxpayer filed appeal before the Appellate Tribunal on 19-10-2012 and applied for condonation of delay, on account of approach to wrong forum---Validity---Taxpayer was appraised by the First Appellate Authority of the correct position on 10-7-2012 and there was still time to file appeal up to 19-7-2012 he should have immediately preferred appeal before the Appellate Tribunal---Inaction on the part of taxpayer in filing the appeal up to 18-10-2012 had no justifiable cause for condoning the delay and explanation tendered was not tenable---Delay of each and every day should have been explained with sufficient cause which was not available---Application for condonation of delay was rejected by the Appellate Tribunal.

2002 SCMR 1004 rel.

2002 PTD 1035 irrelevant.

(b) Sales Tax---

----Limitation---Condonation of delay---Scope---Fault in approaching wrong forum for redressal of grievance would not at all be a reasonable cause to condone the delay.

2002 SCMR 1004 rel.

Asim Zulfiqar Ali, FCA for Applicant.

Ms. Sadia Sadaf Gillani, D.R. for Respondent.

Date of hearing: 5th July, 2013.

2013 P T D (Trib.) 2174

[Inland Revenue Appellate Tribunal, Islamabad]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fahim-ul-Haq Khan, Accountant Member

ARMY WELFARE TRUST - NIZAMPUR CEMENT PLANT, RAWALPINDI

Versus

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

M.A. (Rect) S.T.A. No.7/IB of 2013, decided on 3rd July, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 36(3) & 45-A---Assessment/adjudication proceedings, completion of---Limitation---Ex parte order passed on 23-12-2003 by Collector (Adjudication) on basis of show-cause notice dated 4-6-2003 set aside by Federal Board of Revenue vide order dated 29-4-2004---Passing of order-in-original by Adjudicating Officer on 24-6-2004---Validity---Nothing on record to show that Collector had issued extension of time after issuance of such show-cause notice---Applicable limitation in the present case would be 90 days in terms of proviso to S. 36(3) of Sales Tax Act, 1990, which would start from Federal Board of Revenue order dated 29-4-2004---Order-in-original had been passed after 13 months and 25 days as against prescribed period of 90 days---Tribunal set aside impugned order-in-original for being time-barred.

Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax and 2008 PTD 60; Hanif Straw Board Factory v. Additional Collector (Adjudication) Customs, Excise and Sales Tax 2008 PTD 578; Abbasi Enterprises v. Collector of Sales Tax 2008 PTD 2025; Pace International v. Secretary Revenue Division 2006 PTD 340; CBR/Sales Tax Department v. Pace International PTCL 2005 CL. 841; Syed Bhai Lighting Limited v. Collector ST & FE 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan 2009 PTD 1978; Tanveer Weaving Mills v. Deputy Collector Sales Tax 2009 PTD 762; Meraj Din v. Collector Customs, Excise and Sales Tax 2009 PTD 2004; Collector Sales Tax and Central Excise v. Mandial Paper Mills Ltd. 2004 PTD 1714; Pakistan v. Fecto Belarus Tractors Ltd. PLD 2002 SC 208; CIT v. Paracha Textile Mills Ltd. 2010 PTD 1016; (1969) 20 Tax (Trib.) 19; 2004 PTD (Trib.) 805; 2005 PTD (Trib.) 2103; 2005 PTD (Trib.) 1135; 2006 PTD (Trib.) 62; 2006 PTD (Trib.) 1050; 2007 PTD (Trib.) 1917; 2008 PTD (Trib.) 1253; 2009 PTD (Trib.) 1551 and 2010 PTD (Trib.) 91 ref.

Tahir Razzaque Khan, FCA/AR for Applicant.

Imran Shah, D.R. for Respondent.

Date of hearing: 28th May, 2013.

2013 P T D (Trib.) 2194

[Inland Revenue Appellate Tribunal, Lahore]

Before Shahid Jamil Khan, Judicial Member and Muhammad Zahir-ud-Din, Accountant Member

Mian MUHAMMAD ASHRAF, FAISALABAD

Versus

C.I.R. (APPEALS), R.T.O., FAISALABAD

I.T.A. No.1010/LB of 2012, decided on 7th August, 2012.

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

----Ss. 116, 114 & 121(1)(c)---Wealth statement---Best judgment assessment---Wealth statement was not filed with the return and was filed in response to a notice under S.121(1)(c) of the Income Tax Ordinance, 2001---Taxation Officer proceeded under S.121 of the Income Tax Ordinance, 2001 and passed best judgment assessment---First Appellate Authority observed that it was not a case of short document and even subsequent filing of wealth statement will not make the original return as valid return; that the best judgment assessment would be framed if a tax payer did not file wealth statement in violation of provisions of law as contained in S.116(2) of the Income Tax Ordinance, 2001; and that order of best judgment was maintained---Taxpayer contended that in case of any short document, required to be filed along with return under S.114 of the Income Tax Ordinance, 2001, the Taxation Officer was required to proceed under S.121(3) of the Income Tax Ordinance, 2001, asking through a notice, to furnish any short document or statement; that in case of compliance within time the return should be treated as complete return; that in case of non-compliance of notice, return would be treated as incomplete; that provisions of S.121 of the Income Tax Ordinance, 2001 could only be invoked if the return under S.114 of the Income Tax Ordinance, 2001 was treated as invalid; that on furnishing of statement under S.116 of the Income Tax Ordinance, 2001 the return became complete; and it had attained the status of assessment order under S.120 of the Income Tax Ordinance, 2001; that notice under S.121(1)(c) of the Income Tax Ordinance, 2001, at best, could be treated as notice under S.120(3) of the Income Tax Ordinance, 2001 read with S.116(1) of the Income Tax Ordinance, 2001 and on compliance by filing wealth statement, the return under S.114 of the Income Tax Ordinance, 2001 should have been treated as complete; that order under S.121 of the Income Tax Ordinance, 2001 was against the spirit of scheme of Income Tax Ordinance, 2001; and that assessment under S.121 of the Income Tax Ordinance, 2001 was a second assessment which could not have been passed in presence of deemed assessment under S.120 of the Income Tax Ordinance, 2001---Validity---Commissioner, in case of non-furnishing of wealth statement, by tax payer, had option to issue notice under S.120(3) of the Income Tax Ordinance, 2001 or to issue notice under S.116(1) or under S.121(1)(c) of the Income Tax Ordinance, 2001 and pass a best judgment assessment---Said provisions needed harmonious construction leading to a definite action for default of not furnishing wealth statement---If a wealth statement as required under S.116(2) and (2A) of the Income Tax Ordinance, 2001 was not furnished along with return under S.114 of the Income Tax Ordinance, 2001, the return was incomplete for not fulfilling the requirement of S.114(2) of the Income Tax Ordinance, 2001---Department should, on such default, issue a notice under S.120(3) read with S.116(1) of the Income Tax Ordinance, 2001 informing the taxpayer about the deficiency and directing him to provide wealth statement---If the wealth statement was furnished within the time to the satisfaction of the Commissioner, the return should be treated to be complete on the day it was furnished---If the notice under S.120(3) read with S.116(1) of the Income Tax Ordinance, 2001 was not complied with, the return should be treated as invalid return---Provisions of S.121 of the Income Tax Ordinance, 2001 could be invoked only after declaring the return filed by the taxpayer under S.114 of the Income Tax Ordinance, 2001 as invalid under S.120(4) of the Income Tax Ordinance, 2001---Return filed under S.120 of the Income Tax Ordinance, 2001 became an assessment order by operation of law unless it was declared invalid under S.120(4) of the Income Tax Ordinance, 2001---Taxation Officer could not proceed under S.121 of the Income Tax Ordinance, 2001 by keeping the fate of return filed under S.114 of the Income Tax Ordinance, 2001 in lurch---Orders of the authorities below were declared to have been passed against the spirit of Income Tax Ordinance, 2001---Notice issued under S.121(1)(c) of the Income Tax Ordinance, 2001 should be treated as notice under S.120(3) read with S.116(1) of the Income Tax Ordinance, 2001---Since taxpayer had filed wealth statement in response to the notice, the return filed under S.114 of the Income Tax Ordinance, 2001 shall be treated to be complete on the day it was furnished.

2011 PTD (Trib.) 184 ref.

(b) Interpretation of statutes---

----No provision should be construed in isolation---Whole statute is to be read to find out the intent of legislature.

Muhammad Imran Rashid for Appellant.

Sajjad Tasleem, D.R. for Respondent.

Date of hearing: 7th August, 2012.

2013 P T D (Trib.) 2204

[Inland Revenue Appellate Tribunal, Islamabad]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sajjad Haider Khan, Accountant Member

MUHAMMAD TAHIR Prop: Muhammad Tahir and Brothers

Versus

COMMISSIONER INLAND REVENUE (LEGAL) REGIONAL TAX OFFICE, ABBOTTABAD

I.T.As. Nos. 732/IB to 736/IB of 2011, decided on 19th June, 2013.

(a) Constitution of Pakistan---

----Arts. 246 & 247---Northern Areas (Gilgit-Baltistan), territories of---Status and historical background stated.

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

----Ss. 1(2) & 77----Constitution of Pakistan, Arts. 1(1), 246 & 247---Northern Areas (Gilgit-Baltistan), territories of---Income Tax Ordinance, 2001, applicability to said territory---Scope---Income Tax Ordinance, 2001 would not extend to Northern Areas for same not being part of territories of Pakistan---Work done in Northern Areas would not come under provisions of Income Tax Ordinance, 2001 irrespective of place of residence or place of payment---Income derived from non-taxable territory by a person belonging to taxable or non-taxable territory would be exempt from application of Income Tax Ordinance, 2001, but he would be liable to pay tax for income derived from taxable territory.

2010 PTD (Trib.) 734 and Messrs Shoukat Khan and Co.'s case I.T.A. No. 185/PB of 2010, dated 5-4-2011. ref.

2010 PTD (Trib.) 1099 and Messrs Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. and 6 others 2008 PTD 169 ref.

Bashir Ahmed for Appellant.

Naveed Hassan, D.R. for Respondent.

Date of hearing: 9th April, 2013.

2013 P T D 2219

[Inland Revenue Appellate Tribunal, Islamabad]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fahim-ul-Haq Khan, Accountant Member

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

Versus

AIRBLUE LIMITED, ISLAMABAD

S.T.A. No.284/IB of 2012, decided on 3rd July, 2013.

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

----S. 45-B---Appeal---Remand of case to Adjudicating Authority by Appellate Authority---Validity---Taxpayer's plea before Appellate Authority was that Adjudicating Officer had not provided him reasonable opportunity to explain his point of view---Phrase "as he thinks fit" used in S. 45-B(3) of Sales Tax Act, 1990 vested Appellate forum with powers to remand case for de novo consideration by Adjudicating Authority---Tribunal upheld impugned order in circumstances.

Commissioner of Income Tax v. Walchand and Co., AIR 1967 SC 1435 = (1967) 65 ITR 381 (SC), P.384; Babulal Nagar v. Shree Synthetics Ltd., AIR 1984 SC 1164, 1165; Narendra Sing v. Chhotey Singh AIR 1983 SC 990, 994; Central Camera Co., (Pvt.) Ltd., v. Government of Madras, (1971) 27 S.T.C. 112 (Mad.) pp. 115-16 and CIT v. Assam Travels Shipping Service 1993 PTD 885= (1993) 199 ITR 1 (SC) rel.

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

----S. 45-B(2)(3)---Powers of Appellate Authority under S. 45-B (3) of Sales Tax Act, 1990---Scope---Section 45-B(3) of Sales Tax Act, 1990 being an exception to subsection (2) thereof in order to save taxpayer from double jeopardy---Appellate Authority, if felt necessary to make further enquiry, would not remand case for de novo consideration, rather would be bound to record reasons on basis of his enquiry and pass order.

Imran Shah, D.R. for Appellant.

Tahir Razzaque Khan, FCA for Respondent.

Date of hearing: 28th May, 2013.

2013 P T D (Trib.) 2233

[Inland Revenue Appellate Tribunal, Islamabad ]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sajjad Haider Khan, Accountant Member

Raja ABDUL ISLAM

Versus

COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICE, GUJRANWALA

I.T.A. No.1066/LB of 2013, decided on 15th August, 2013.

(a) Taxation---

----Person could be made liable to pay tax on basis of explicit law, but not on presumption---Principles.

A citizen can be made liable to pay tax only on the basis of unambiguous and explicit law. In fiscal statute, there is no room for any presumption or intendment and no provision of law can, by any process of argumentation or interpretation, be loaded with meaning or intention, which plain language of the provision does not convey.

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

----Preamble---Tax culture in working classes, development of---Steps stated.

Tax is not a forced liability, but in fact it is a responsibility to owe to the State a proportionate share given by the taxpayer for utilizing and consuming the services provided by the State. Its determination must be made with a view to keep the above principle intact and to maintain confidence and to boost the encouragement in the tax paying society, so that the tax should not be taken by the concerned public to be a harsh imposition, but a duty. It is high time to develop tax culture in the working classes, which held the enforcement of self-assessment at large and the tendency of concealment of taxes shall be gradually discouraged and public would rather prefer to be the taxpayer instead of tax swallowers. Similar is the position regarding Foreign National making investment, they would also be encouraged rather forced to make investment in other countries.

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

----Ss. 122 & 122C---Provisional assessment, order of---Essential requisites stated.

The assessment under Section 112C requires the same amount of care as is required under subsections (5) and (5A) of Section 122 of the Income Tax Ordinance, 2001, and such provisional assessment must indicate on what material or the basis the income is assessed and tax is determined. This is necessary because a provisional assessment order might attain finality under Section 122C(2) of the Income Tax Ordinance, 2001 or may be subject to revision by the High Court under Section 115 of Code of Civil Procedure, 1908 or may be matter in writ before High Court under Article 199 of the Constitution of Pakistan, therefore, order should contain sufficient provision, the material on which the assessment is based, so that the concerned authority can form an unbiased opinion of the fairness of assessment. This is also necessary on the following counts:

(i) the provisional assessment has to attain the finality after the expiry of statutory period of sixty days, if the taxpayer failed to file tax return;

(ii) for the satisfaction of the judicial authorities that the provisional assessment has been made on the reasonable grounds and on substantial material and it is not arbitrary or based merely on guess work, conjecture or speculation;

(iii) an order of provisional assessment not disclosing the basis or material is against the principles of natural justice; and

(iv) the provisional assessment is bad and liable to be set aside, if the assessment order suffers from this deficiency.

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

----S. 122C(1)(2)---Provisional assessment, order of---Service of such order on taxpayer on 16-7-2011 and appeal thereagainst filed on 26-7-2011---Income tax return along with requisite documents received on 12-8-2011 by department during pendency of appeal---Dismissal of appeal by Appellate Authority and initiation of recovery proceedings by department---Validity---Provisional assessment would cease to attain finality, rather its order would stand quashed by operation of law, once documents required under First Proviso to S. 122C(2) of Income Tax Ordinance, 2001 were filed by taxpayer within sixty days---Vested right had accrued in favour of taxpayer---Appellate forum could not give lease of life to an assessment order, which had ceased to exist and quashed under statutory provision---Vested right accrued in favour of taxpayer could not be taken away by omitting to follow prescribed procedure or by passing negligent assessment order---Tribunal set aside impugned order and recovery proceedings in circumstances.

2012 PTD (Trib.) 547; 2012 PTD (Trib.) 839 and (2010) 102 Tax 149 (Part-I) (sic) ref.

Tahir Razzaque Khan, FCA for Applicant.

Iftikhar Ahmed Baloch, DR for Respondent.

Date of hearing: 20th June, 2013.

2013 P T D (Trib.) 2243

[Inland Revenue Appellate Tribunal (Pakistan) Karachi]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheem-ul-Haq Khan, Accountant Member

I.T.A. No.890/KB of 2011, decided on 28th March, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.156, 161 & 205---Prizes and winnings---Free samples---Free samples distributed by taxpayer at random to children in various schools throughout Pakistan and also to general public in various shopping malls and other entertainment places were taxed under S.156 of the Income Tax Ordinance, 2001 as prizes, and tax @ 20% was levied under S.161 along with additional tax under S.205 of the Income Tax Ordinance, 2001---Taxpayer contended that provision of S.156 of the Income Tax Ordinance, 2001 was not applicable in the case, as the taxpayer had not offered any prize through any scheme, nor any prize had been offered to a wining person on the basis of any competition or through a lucky draw or any other scheme, nor free samples had been awarded as a prize to a particular distributor on achievement of specified target sales, nor as an incentive to any particular distributors under any scheme; that there was no such adverse finding in the order passed under S.161 of the Income Tax Ordinance, 2001; that from the inception of manufacturing activities, the taxpayer had always utilized the services of distributors for random distribution to individuals as free samples to various consumers and that as main consumer of confectionary and other items were children, the distribution of free samples to individual children in various schools throughout Pakistan and also to general public in various shopping malls and other places was purely a random distribution and did not fall within the ambit of "prize" as envisaged in S.156 of the Income Tax Ordinance, 2001---Validity---Word 'prize" had been unanimously defined in all the dictionaries and referred to as a reward, or symbol of success offered or won in some competition by contest or granted in recognition of excellence---Free distribution as samples throughout Pakistan was not on the basis of any competition amongst school children or any quiz or winning draw in schools or in shopping malls etc. but was entirely and purely a random distribution to each and every children in schools and shopping malls etc. and this fact had not been disputed---Taxpayer was manufacturer of various confectionary products, candy, potato chips, chocolates and such other items which were consumed by children---Free samples distributed by the taxpayer at random to the children in various schools and other places throughout Pakistan could not be termed as a "distribution of prize or prize offered" within the meaning of S.156 of the Income Tax Ordinance, 2001---Unit price of a single gift i.e. candy/potato chips etc was very meager and the large scale split of free samples amongst places and people to promote brand name, sales-target, market share or under any other business exigency, the provisions of S.156 of the Income Tax Ordinance, 2001 would not be applicable in such circumstances---Order passed by both the officers below were cancelled by the Appellate Tribunal and tax levied under Ss.161 & 205 of the Income Tax Ordinance, 2001 was deleted.

2010 PTD 2178 (Trib.) distinguished.

Iqbal Salman Pasha and Nadeem Ahmed Dawoodi for Appellants.

Muhammad Ali Jaffri, D.R. for Respondent.

Date of hearing: 18th February, 2013.

2013 P T D (Trib.) 2252

[Inland Revenue Appellate Tribunal]

Before Zafar Iqbal, Judicial Member and Mrs. Zareen Saleem Ansari Accountant Member

S.T.A. No.339/KB of 2009 and Order-in-Original No.2 of 2005, decided on 30th September, 2010.

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

----S.36 (3)----Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on 18-3-2004 and Order-in-Original was dated 17-1-2005 which was passed 213 days after issuance of show-cause notice---As per mandatory provisions of S.36(3) of the Sales Tax Act, 1990 the order was to be passed within 90 days of issuance of show-cause notice or within such period as extended by the Collector which was not to exceed 90 days---Nothing was produced by the Department to show that such extension was granted---Even assuming for sake of argument only, that extension was granted, then order should have been passed within 180 days of issuance of show-cause notice---Order having been passed after 213 days, same was clearly time barred and not sustainable in law and liable to be cancelled---Provisions of S.36(3) of the Sales Tax Act, 1990 were of mandatory nature and any order passed beyond the time specified in S.36(3) of the Sales Tax Act, 1990 was time barred---Order was cancelled by the Appellate Tribunal in circumstances.

Tanveer Weaving Mills v. Dy Collector Sales Tax 2009 PTD 762; Hanif Straw Board v. Addl. Collector (Lahore High Court) 2008 PTD 578; Super Asia Muhammad Din and Sons v. Collector 2008 PTD 60 and Abbasi Enterprises v. Collector Sales Tax 2008 PTD 2025 rel.

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

----Ss.3, 2(12) & 72---Constitution of Pakistan, Art.25---Sales Tax Circular No. 02/2006 dated 20-3-2006---C.B.R. Ruling 27/2002 dated 2-4-2002---Scope of tax---Goods, scope---Road/highway construction---Taxation of---Taxpayer contended that he entered into a contract with National Highway Authority which was a government entity to construct Costal Highway; and contract was not for supply of goods but for road/highway construction which was immoveable property/goods and a non taxable action and clearly fell outside the scope of "goods" which were subjected to charge of sales tax; and Central Board of Revenue through Circulars 27 of 2002 and 02 of 2006 had clearly given ruling to the effect that "there is no Sales Tax on immoveable property such as building roads etc. since these are excluded from definition of "goods" under Sales Tax Act, 1990. Therefore no sales tax is payable when a contractor constructs a building or a road for a Government Organization"---Validity---Said Circulars of Central Board of Revenue were fully applicable to the taxpayer as National Highway Authority was a Government organization and the taxpayer constructed a road/ highway which was a non-taxable activity and outside the definition of "goods"---Order of Collector was not sustainable in facts and in law and was cancelled.

2005 PTCL 462 (sic) and 2012 PTD (Trib.) 1697 ref.

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

----S.72---Officers of sales tax to follow Board's orders, etc.---Circulars/guidance/rulings of Central Board of Revenue are binding on tax officials as per S.72 of the Sales Tax Act, 1990 and beneficial circulars are binding.

2002 PTD 720 and 2002 PTD 63 rel.

(d) Constitution of Pakistan---

----Art. 25---Sales Tax Act (VII of 1990), Ss. 3 & 2(12)---Equality of citizens---Order of Collector subjecting road construction to be liable to Sales Tax was discriminatory and violative of Art.25 of the Constitution as the Department was not able to cite any other case of any other such contractor who had been subjected to Sales Tax on account of road construction work of National Highway Authority---Discriminatory order were violative of Art.25 of the Constitution and not sustainable in law---Order of Collector was not sustainable in law and was cancelled by the Appellate Tribunal.

1997 SCMR 641 and 2001 PTD 3919 rel.

Abid Shaban for Appellant.

Ayaz Mehmood, D.R. for Respondent.

Date of hearing: 6th August, 2010.

2013 P T D (Trib.) 2268

[Inland Revenue Appellate Tribunal, Islamabad]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fahim-ul-Haq Khan, Accountant Member

ARMY WELFARE TRUST - NIZAMPUR CEMENT PLANT, RAWALPINDI

Versus

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

S.T.A. No.71/IB and M.A. (R) S.T.A. No.18/IB of 2013, decided on 3rd July, 2013.

(a) Taxation---

----No body could be made liable to pay tax on basis of presumption or intendment, except on basis of explicit provisions of law---Principles.

A citizen can be made to pay tax only on the basis of unambiguous and explicit law. In fiscal statutes, there is no room for any presumption or intendment and no provision of law can, by any process of argumentation or interpretation, be loaded with meanings or intentions, which plain language of the provision does not convey.

(b) Constitution of Pakistan---

----Arts. 189 & 190---Law interpreted by superior courts could not be equated with enactment of a new law---Application of such precedent by any forum in a manner contrary thereto would be a nullity---Principles.

The interpretation of law by Supreme Court cannot be equated with enactment of a new law, but it only enunciates the correct import of law and explains as to what law has been from the very beginning. The precedent so determined by the Apex Court is binding on all the judicial and administrative forums of the country.

The ruling of the Superior Judiciary and particularly the Supreme Court enunciates the correct exposition of law and if in any case, has been applied either by a Subordinate Court or an Administrative Forum in a manner contrary to the interpretation of the Superior Judiciary, application of law to the extent of repugnance would be a nullity in the eye of law.

A judgment of Supreme Court enunciating a principle of law is a judgment in rem and its benefit is extendable to cases involving similar facts and circumstances, even though, they may not be party to the case before a competent court of law.

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

----S. 44---Constitution of Pakistan, Arts. 25 & 189---Refund of overpaid duty claimed by applicant on basis of judgment of Supreme Court, wherein he was not party---Scope---Judgment of Supreme Court enunciating a principle of law would be a judgment in rem, thus, non-parties thereto could take its benefits, if their cases involved similar facts and circumstances---Provision of S. 44 of Federal Excise Act, 2005 neither restricted applicability of such judgment to litigant party only nor could debar applicant from taking benefit thereof---Condition of limitation of one year for claiming refund would not apply to applicant having paid duty under mistake of law or fact, which came to his notice after such judgment---Non-application of such judgment to a case of non-party thereto would result in discriminatory treatment violating Art. 25 of the Constitution---Such overpaid duty would be refundable to applicant as a matter of right and its denial would be without lawful authority---Illustration.

2007 PTD 1656; 2007 SCMR 1367; 2003 PTD 1002; Maqbool Textile Mills Ltd. v. Federation of Pakistan 2001 PTD 1; 2001 PTD 1; 1998 PTD (Trib.) 3866; 2000 SCMR 1305; PLD 2006 SC 697; Deutsche Morgan Grenfell Group Plc v. Commissioner IR 78 TC 120; (2003) STC 1017 (Ch.) and (2007) STC 1 (HL); Kohinoor Industries Ltd. v. Federation of Pakistan 1994 CLC 994; Hotel Midway House Limited v. Director General 1993 SCMR 1712; 7-Up Bottling Company (Pvt.) Limited v. Additional Collector 2002 YLR 3498; Messrs Leghari Beverages v. Additional Collector, Multan 2005 PTD (Trib.) 1571; Messrs National Baverages (Pvt.) Ltd. v. Additional Collector, Karachi PTCL 2005 CL. 193 and Northern Bottlers Co. v. Assistant Collector ST & FE 2012 PTD (Trib.) 1257 ref.

PLD 1998 SC 64 rel.

Tahir Razzaque Khan, FCA/AR for Appellant.

Imran Shah, D.R. for Respondent.

Date of hearing: 28th May, 2013.

2013 P T D (Trib.) 2336

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fahim-ul-Haq Khan, Accountant Member

SIGMA MOTORS LTD., ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

I.T.As. No. 636/IB and 637/IB of 2012, decided on 4th June, 2013.

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

----S. 129---Earlier findings of Appellate Authority regarding rate of tax in similar case---Powers of Appellate Authority to deviate from such findings in subsequent case---Scope---Appellate Authority would be bound to follow its earlier findings in absence of any change in nature of income, otherwise he would be bound to give irrefutable reasons for chargeability at higher rate of tax---Illustration.

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

----Ss. 113, 233 & First Sched., Part-III, Division-IV, Cl. (2)---Charge of rate of tax on foreign indenting commission received from foreign principal for sale of its products in Pakistan---Scope---Provision of S.233 of Income Tax Ordinance, 2001 would not apply to such transaction of special nature, which would be chargeable @ 5% in terms of Cl. (2) of Division IV of Part-II of First Sched., thereof.

(c) Interpretation of statutes---

----Exception in a statute would restrain enacting clause from general clause.

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

----S. 221---Rectification of error floating on surface of order---Powers of Assessing Officer---Scope---Assessing Officer after coming to know about such error would be bound to correct same on his own motion.

Tahir Razzaque Khan, FCA for Appellant.

Imran Shah, D.R. for Respondent.

Date of hearing: 28th May, 2013.

2013 P T D (Trib.) 2344

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fahim-ul-Haq, Accountant Member

AIRBLUE LTD., ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

S.T.A. No.375/IB of 2012, decided on 1st June, 2013.

(a) Taxation---

----Issuance of show-cause notice before initiating recovery proceedings---Essential requisites stated.

Any proceedings taken without issuing proper show-cause notice would be illegal.

Show-cause notice must satisfy the following basic requirements:

(i) The notice must be properly served on the concerned person and must give sufficient time to enable him to prepare his case;

(ii) Notice should be adequate and not merely repeat the statutory language without giving facts or other particulars;

(iii) The notice must require the party to show-cause to the proper office why he should not pay a certain stated amount;

(iv) The grounds in the show-cause notice should be clear, specific and unambiguous;

(v) Notice should be issued on the subjective satisfaction of the concerned office. A notice issued in pursuance of advice is illegal and liable to be quashed;

(vi) The basic principle is that a show-cause must be real show-cause, keeping an open mind with regard to the subject-matter of the inquiry proposed and if the show notice bears out a foreclosed or prejudged mind that would violate the principles of natural justice;

(vii) Where the notice merely states that "it appears" that the assessee has violated some conditions and duty demanded without asking the assessee to show cause, it amounts to violation of natural justice. Demand to be set aside;

(viii) The amount must be stated and manifestly specified in the notice itself;

(ix) The amount determined by the authority as payable shall not exceed the amount specified in the show-cause notice; and

(x) Such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjuncture and calculations for ascertainment of the amount ordered to be paid.

Humayun Ltd. v. Pakistan and others PLD 1991 SC 963; Mamy Beverages v. Naseem 1995 PTD 91; Millat Tractors Limited v. Collector of Sales Tax and Central Excise 2003 PTD 1445; D.G. Khan Cement Company Ltd.'s case 2004 PTD 1179 (SC) = 2004 SCMR 456; Collector of Sales Tax and Central Excise v. Baba Farid Sugar Mills Ltd., 2004 PTD 823; Shamroz Khan v. Muhammad Amin PLD 1978 SC 89; Additional Collector Sales Tax v. Rupali Polyester Limited 2005 PTD 2412; Pakistan State Oil Limited v. Collector of Customs, Sales Tax and Central Excise 2006 PTD 397; Deputy Collector Central Excise and Sales Tax v. I.C.I. Pakistan Limited 2006 SCMR 626; and Airblue Limited v. CIR, Zone-II, LTU in S.T.A. No. 217/IB/2011 order dated 21-5-2012 ref.

Guide to Central Excise-Law and Practice by Arvind P. Datar and B.N. Gururaj, Sixh Edition, Volume-1 rel.

(b) Administration of justice---

----Where law prescribes a specific method/procedure for doing an act, then same should be done strictly in accordance with such procedure or not at all.

Tahir Razzaque Khan, FCA for Appellant.

Imran Shah, D.R. for Respondent.

Date of hearing: 28th May, 2013.

2013 P T D (Trib.) 1557

[Appellate Tribunal Inland Revenue (Pakistan) Karachi]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheemul Haq Khan, Accountant Member

Messrs BROTHERS ENTERPRISES, KARACHI

Versus

ADDITIONAL COMMISSIONER, RANGE-B, ZONE-II, RTO-II, KARACHI

I.T.A. No.134/KB of 2013, decided on 29th March, 2013.

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

----Ss.122 (5A) & 122(9)---Amendment of assessment---Call for books of accounts, record, documents and evidence---Taxpayer contended that Additional Commissioner was not empowered to call for books of accounts, record, documents and evidence; and seeking help of such material through notice under Ss.122(9)/122(5A) of the Income Tax Ordinance, 2001 to establish erroneousness and prejudice to the revenue, constituted fishing inquiries and was a clear indication to show that there was nothing erroneous and prejudicial to the interest of revenue in the order of assessment sought to be amended---Validity---In the proceedings under S.122(5A) of the Income Tax Ordinance, 2001 the erroneousness and prejudice to the revenue should be definitive and visible from the order sought to be amended---Show-cause notice should not be based on suspicion, apprehensions or assumptions---Assessing Officer could not suggest particular evidence at the time of commencement of proceedings under S.122(5A) of the Income Tax Ordinance, 2001---Such was prerogative of taxpayer what he offers to explain or contradict the stance of assessing authority---Edifice of action under S.122(5A) of the Income Tax Ordinance, 2001 could be built after obtaining evidence from the taxpayer---Not only multiple notices on the same issue were issued but the Assessing Officer had been insisting on production of books of accounts, documents and evidence to establish erroneousness and prejudice to the interest of revenue---Section 122(5A) of the Income Tax Ordinance, 2001 did not empower the revisional authority to suggest an evidence and call for books of accounts, documents and evidence.

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

----Ss.122(5A) & 120---Amendment of assessment---Issuance of multiple notices on the same issue---Validity---Despite receiving explanation in response to the queries raised in the notices under S.122(5A) of the Income Tax Ordinance, 2001, Assessing Officer issued four show-cause notices pressing for production of books of accounts record, documents and evidence which was not permissible in proceedings under S.122(5A) of the Income Tax Ordinance, 2001---Action of Assessing Officer was patently illegal and void so far as issuance of multiple notices was concerned as law did not provide for issuance of multiple notices on the same issue---Repeated issuance of notices on the same issue constituted fishing inquiries---Action of Assessing Officer to treat the order under S.120 of the Income Tax Ordinance, 2001 as erroneous and prejudicial to the interest of revenue within the meaning of S.122(5A) of the Income Tax Ordinance, 2001 was not sustainable in the eyes of law.

2010 PTD 111 rel.

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

----Ss. 111(1)(d) & 122 (5A)---Unexplained income or assets---Tax year 2011---Addition on account of suppressed purchases---Taxpayer contended that provision of S.111(1)(d) of the Income Tax Ordinance, 2001, treating suppression of any amount chargeable to tax production, sales or receipts as an item covered under S.111 of the Income Tax Ordinance, 2001 were inserted by the Finance Act, 2011 and being detrimental to the interest of taxpayer were applicable w.e.f. tax year 2012 and that addition made under S.111(1)(d) of the Income Tax Ordinance, 2001 was without lawful authority---Validity---Provision of Cl.(d) of subsection (1) of S.111 of the Income Tax Ordinance, 2001 having been introduced by the Finance Act, 2011 and being detrimental to the interest of taxpayer did not have retrospective application.

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

----Ss. 111(1)(d) & 122 (5A)-----F.B.R. Circular No. 7 of 2011 dated 1-7-2011---Unexplained income or assets---Suppression of purchases---Addition---Taxpayer contended that provision of S.111(1)(d) of the Income Tax Ordinance, 2001 pertained to concealment of income or furnishing of inaccurate particulars of income which was not the subject-matter of proceedings under S.122(5A) of the Income Tax Ordinance, 2001; that addition under S.111(1)(d) of the Income Tax Ordinance, 2001 to total income was without lawful jurisdiction as the same had been made on account of alleged suppressed or understated purchases; that suppressed or understated purchases were not covered by the provisions of S.111(1)(d)(i) and (ii) of the Income Tax Ordinance, 2001; that S.111(1)(d) of the Income Tax Ordinance, 2001 dealt with suppression of production, any item of receipts or sales or any amount chargeable to tax; and that it did not deal with suppressed purchases; and addition being covered by the provision of S.111(1)(d)(i) and (ii) of the Income Tax Ordinance, 2001 was void ab initio and illegal---Validity---Section 111(1)(d) of the Income Tax Ordinance, 2001 pertained to concealment or furnishing of inaccurate particulars of income and had a nexus with the provision of S.122(1) of the Income Tax Ordinance, 2001 read with subsections (5) and (8) of S.122 of the Income Tax Ordinance, 2001---Federal Board of Revenue itself had clarified that by virtue of insertion of S.111(1)(d) of the Income Tax Ordinance, 2001 by Finance Act, 2011, any production, sale or any amount chargeable to tax and suppression of any item of receipt liable to tax in whole or in part had to be treated as "concealed income" whereas S.122(5A) of the Income Tax Ordinance, 2001 dealt with the orders which were found erroneous and prejudicial to the interest of revenue but the orders involving concealment had to be dealt with under S.122(1) read with S.122(5)(8) of the Income Tax Ordinance, 2001---Action of Assessing Officer to invoke provision of S.111(1)(d) of the Income Tax Ordinance, 2001 in his order under S.122(5A) of the Income Tax Ordinance, 2001 was not sustainable in the eyes of law---Addition was not maintainable even otherwise, the taxpayer was not required to explain the nature of source of investment in purchases---Besides, Assessing Officer had chosen to ignore the written explanation offered by the taxpayer that the amount was pertained to FTR portion of sales and corresponding sales were declared---In the presence of explanation furnished by the taxpayer in response to the query under S.111(1)(d) of the Income Tax Ordinance, 2001 and Assessing Officer's inability to rebut the same, there was no justification for addition under S.111(1)(d) of the Income Tax Ordinance, 2001---Addition was deleted by the Appellate Tribunal accordingly.

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

----Ss. 111(1)(b) & 122 (5A)---Unexplained income or assets---Addition on account of investment in purchase---Taxpayer contended that as per existing market practice the goods were purchased on credit basis and it was privileged custom in trading the goods for sale taken on credit of 7 days, 10-days or 15-days from companies, and payments made after selling out, the payments made to companies, the revolving of capital in this line of business was sufficient---Explanation of taxpayer was not considered satisfactory and Assessing Officer proceeded upon the addition based on peak purchases after subtracting capital---Validity---Assessing Officer had not proved his case in absolute terms or on the basis of corroborating evidence i.e. analysis of sales tax return to examine monthly sales/purchases (cash based), opening inventory, volume of creditors, closing inventory, volume of debtors, average number of days allowed by the creditors to the taxpayer to off and average number of days allowed to debtors by the taxpayer for payments---Assessing Officer had also ignored the investment in fixed assets out of invested capital---Taxpayer replied that purchases were effected on credit, but the Assessing Officer totally ignored this fundamental aspects of the explanation and no independent inquiry was made in this behalf---Addition made was not sustainable which was deleted by the Appellate Tribunal with the directions to re-ascertain the quantum of investment in the light of possible cross variables.

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

----S.4(4)---Income Tax Ordinance (XLIX of 2001) S.122(5A)---Mode of payment by, and recovery from, industrial establishment---Charge of Workers' Welfare Fund by the "Additional Commissioner" instead of "Taxation Officer"---Validity---No authority designated as "Taxation Officer" now existed in the Income Tax Ordinance, 2001 whereas as per S.4(4) of the Workers' Welfare Fund Ordinance, 1971, only a "Taxation Officer" could pass an order to charge Workers Welfare Fund---Act of Additional Commissioner to issue notice under S.122(5A) of the Income Tax Ordinance, 2001 and pass order to charge Workers Welfare Fund was without lawful authority---Order passed by the Additional Commissioner to charge Workers Welfare Fund was without lawful authority and the same was directed by the Appellate Tribunal to be deleted.

2011 PTD (Trib.) 748 rel.

Syed Riazuddin for Appellant.

Bashir Ahmed Kalwar, D.R. for Respondent.

Date of hearing: 29th March, 2013.

2013 P T D 21

[Islamabad High Court]

Before Riaz Ahmad Khan, J

Messrs PAK GULF CONSTRUCTION (PVT.) LIMITED

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.1626 of 2011, decided on 2nd July, 2012.

Federal Excise Act (VII of 2005)---

----Preamble---Constitution of Pakistan, Art. 199---Constitutional jurisdiction----Scope---Alternate Remedy---Petitioners, who were in the business of construction, sale and purchase of shops and apartment; were issued notice under the Federal Excise Act, 2005---Contention of the petitioners was that said notice was illegal and without jurisdiction and that under the Federal Excise Act, 2005; they could not be asked to pay any excise duty---Validity---Petitioners had not contended that any provision of the Federal Excise Act, 2005 was illegal; but rather that the provisions of the said Act did not apply to their case---Petitioner's had challenged the applicability of the Federal Excise Act, 2005 to their case and the same would be decided by the Authority provided under the Federal Excise Act, 2005---In presence of such alternate remedy; no writ could be issued---Constitutional petition was dismissed, in circumstances.

1997 SCMR 1244; 1993 SCMR 73 and 1996 SCMR 237 ref.

Hafiz Muhammad Idrees and Syed Touqeer Bukhari for Petitioners.

Saeed Ahmed Zaidi, Hafiz Munawar Iqbal and Babar Bilal for Respondents.

Muhamamd Abid Raja, D.A.G. for the State.

Date of hearing: 2nd July, 2012.

2013 P T D 111

[Islamabad High Court]

Before Muhammad Azim Khan Afridi, J

KINGCRETE BUILDERS through General Manager

Versus

CENTRAL BOARD OF REVENUE through Chairman CBR, Islamabad

Writ Petition No.1765 of 2007, decided on 21st June, 2012.

(a) Civil Procedure Code (V of 1908)---

----S. 20---Place of instituting suit---Scope---Party would be at liberty to bring a cause in a court in territorial jurisdiction whereof cause of action had wholly or partly arisen.

(b) Constitution of Pakistan---

----Art. 199---Constitutional petition---Alternate adequate remedy, non-availability of---Scope---Aggrieved person not having just remedy could approach High Court for seeking relief, including declaration in respect of an unlawful act of person performing functions in connection with affairs of Federal, Provincial or any local government.

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

----S. 18---Constitution of Pakistan, Art. 199---Constitutional petition---Concrete Transit Mixers (CTMs) imported by National Highway Authority---Notice demanding short-paid duty on such CTMs---Petitioner's plea that 5% ad valorem duty (which was already paid) was payable on such CTMs, and not 65% as being demanded through impugned notice---Validity---According to S.R.O. 1090(I)/2006, dated 1-11-2006, only 2500 units of CTMs had been allowed to be imported @ 5% duty on first come and first serve basis---Petitioner had imported and cleared CTMs on 22-9-2006, when rate of duty leviable was 65%---S.R.O. 1090(I)/2006 was effective from 1-11-2006 and had not been given retrospective effect---Duty of 65% leviable on such CTMs at time of its import and release had not been reduced by S.R.O. 1090(I)/ 2006---High Court dismissed constitutional petition in circumstances.

PLD 1997 SC 334; 1997 MLD 1198 and 1999 PTD 1912 ref.

PLD 1999 Kar. 238 distinguished.

Omer Farouk Adam for Petitioner.

Malik Ataat Hussain for Respondents Nos. 1 to 3.

Muhammad Riaz Hussain for Respondent No.1.

Tajammal Hussain for Respondent No.4.

Date of hearing: 21st June, 2012.

2013 P T D 698

[Islamabad High Court]

Before Riaz Ahmad Khan, J

Messrs SAJID TRADERS, LAHORE and 4 others

Versus

M/O COMMERCE, GOVERNMENT OF PAKISTAN through Secretary, Finance and 4 others

Writ Petition No.2702 of 2011, decided on 24th December, 2012.

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

----S.18(3)---Constitution of Pakistan, Art. 199---Constitutional petition---Import of goods---Imposition of regulatory duty by Federal Government under S.18(3) of the Customs Act, 1969---Petitioners impugned S.18(3) of the Customs Act, 1969 on the ground that the same was ultra vires the Constitution, since, inter alia, the object of S. 18(3) of the Customs Act, 1969 was to maintain a balance between prices of goods prevailing in the international market and those in Pakistan and for achieving that object three other special laws, namely, Anti-Dumping Duties Ordinance, 2000; Countervailing Duties Ordinance, 2001 and Safeguard Measures Ordinance, 2002 were already in existence and that in presence of said special laws, recourse to general law could not be made and therefore. Federal Government could not levy regulatory duty under S. 18(3) of the Customs Act, 1969---Validity---Regulatory duty could not be separated from customs duty as it was a part of the same duty---Even if it was presumed that the object of the other three special laws was to maintain balance between the international market and prices prevailing in Pakistan, same would not mean that because of the said special laws, the Federal Government was debarred from levying regulatory duty Legislature had delegated powers to levy regulatory duty to the Federal Government, and therefore the Federal Government had the authority to levy regulatory duty Constitutional petitions were dismissed, in circumstances.

PLD 1998 SC 670; PTCL 1999 CL. 553 and PTCL 1997 CL. 1 rel.

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

----S. 18(3)---Levy of regulatory duty by Federal Government under S. 18(3) of the Customs Act, 1969 Object and purpose One of the reasons for levy of regulatory duty was to control the fluctuating prices trend in the international market, but it could not be said that it was the only object of levying regulatory duty---­Object and purpose of regulatory duty was to control the fluctuating prices trend in the international market apart from generating extra funds / revenue for the State as well as the regulation of import and export of items so as to maintain a proper balance in the ever fluctuating international market.

PTCL 1997 CL. 1 rel.

(c) Interpretation of Statutes---

----Fiscal statutes were to be strictly construed and by way of interpretation, new words could not be added to statute.

Shafqat Mahmod Chohan, Niaz Ullah Niazi, Monim Sultan, Saud Nasrullah Cheema, Mlaik Naveed Suhail, Ch. Arshad Mahmood, Mudassar Ikram, Chaudhry, Tufail Shahzad and Sabir Ahmed, Ahmed Hafeez and Mian Tahir Iqbal for Petitioners.

Messrs Athar Minullah, Dr. Rana M. Shamim, Raja Muhammad Iqbal, M. Amin Feroze, M.D. Shahzad, Mojeeb-ur-Rehman Warriach, Abid Farooq Awan and Binyameen Abbasi, Shahab Imran, Tahir Abbas and Moin Afzal, Deputy Collectors/representatives for Respondents.

Date of hearing: 17th December, 2012.

2013 P T D 747

[Islamabad High Court]

Before Riaz Ahmad Khan, J

PAKISTAN TOBACCO COMPANY LTD., ISLAMABAD

Versus

ADDITIONAL COMMISSIONER (UNIT-II), TAXATION OFFICER, LARGE TAX PAYERS UNIT, ISLAMABAD

Writ Petition No.2412 of 2009, decided on 12th April, 2012.

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

----S. 122(5A)---Assessment order, amendment of---Powers of Commissioner---Scope---Assessment order, before its amendment, must be found by Commissioner to be erroneous and prejudicial to interest of revenue---Such findings could not be made by Commissioner without application of his mind.

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

----Ss. 122(5A)(9), 210 & 211---Constitution of Pakistan, Art. 199---Constitutional petition---Issuance of show cause notice by Additional Commissioner for amendment of assessment order---Petitioner's plea was that powers contained in S. 122(5A) of Income Tax Ordinance, 2001 for being power of revision could be exercised by authority having passed original order, but not by his delegatee---Validity---Powers of Commissioner to amend assessment orders as contained in S. 122(5A) were not treated as power of revision by Ordinance itself---Exercise of such powers might be in nature of powers being exercised in revision, but same would not make S. 122(5A) as section relating to revision---Ordinary consequences of revision would not apply to an order passed by Commissioner under S. 122(5A)---Powers available to Commissioner under S. 122(5A) could be delegated to Additional Commissioner, thus, in such case functions available to Commissioner i.e. to provide an opportunity of hearing to taxpayer, scrutiny of assessment, proper application of mind and amendment of assessment order, would also stand delegated to Additional Commissioner---High Court repelled such plea in circumstances.

2003 PTD 734; 2009 PTR 23; 2001 PTD 1467 and 2006 PTD 734 ref.

(c) Interpretation of statutes---

----Non-availability of a provision in statute---Effect---Such provision could not be inserted in statute by implication or interpretation of law.

(d) Revision---

----Revisional powers, exercise of---Scope---Authority having passed original order could not exercise such powers ordinarily.

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

----Ss. 122(5A), 210 & 211---Constitution of Pakistan, Art. 199---Constitutional petition---Issuance of show cause notice by Additional Commissioner for amendment of assessment order---Petitioner's objections was that assessment order passed by Assessing Officer was time barred; and that his income had not Been properly and legally assessed---Validity---Such objections would not render impugned show-cause notice as without jurisdiction---Petitioner had alternate remedy and could raise such objections before Income Ta Authorities---High Court dismissed constitutional petition in circumstances.

Messrs Amin Textile Mills (Pvt.) Ltd. v. Commissioner of Income Tax and 2 others 2000 SCMR 201; Shagufta Begum v. The Income Tax Officer, Circle-XI, Zone-B, Lahore (1989) 60 Tax 83 (H.C. Kar.) = 1989 PTD 544 and Hafiz Muhammad Asrif Dar v. Income Tax Officer PLD 1989 SC 109 rel.

?????.

2013 P T D 825

[Islamabad High Court]

Before Riaz Ahmad Khan, J

Messrs FACO TRADING through Proprietor

Versus

MEMBER, CUSTOMS, FEDERAL BOARD OF REVENUE and others

Writ Petition No.1756 of 2010, decided on 29th May, 2012.

Customs Act (IV of 1969)---

----Ss. 25 & 25-A---Constitution of Pakistan, Art. 199---Constitutional petition---Determination of customs value of goods---Adoption of the "Fallback method"---Scope---Petitioners impugned valuation order passed by Director Valuation on the ground that same was not according to law---Contention of the petitioners was that customs officials were obligated to assess valuation on basis of transactional value/declared value of goods, however, if they were prepared to accept the same, then under S. 25-A of the Customs Act, 1969 valuation could be determined after following the sequential method laid down in S.25 of the Customs Act, 1969, and that Customs authorities were bound to give reasons for selecting the fallback method and not the other methods of valuation---Validity---Valuation officer presently, may adopt any method provide in S. 25 of the Customs Act, 1969, however the same did not mean that valuation officer had unfettered powers to adopt any method on basis of pick and choose and had to keep in view the interest of the importer as well---Valuation officer had the discretion to follow any method provided in the subsections of S. 25 of the Customs Act, 1969 however, the method adopted must not be to the detriment of the importers and for the purpose of excluding other methods, reasons must be given---Reasons were also to be given for adopting a particular method so that it became clear to the importer that the order of valuation was in the public interest and not to his detriment---Under S. 25(9) Customs Act, 1969 criteria had been given to adopt the "fall back method" and if the said method is adopted, reasons must be given as to why customs value could not be determined under the other methods---Reasons given, in the present case, for the adoption of the "fall back method" were in violation of S. 25(9) of the Customs Act, 1969 as they were based on presumption as prices taken into consideration were taken from the internet and no reasons were given as to how value of goods could not be determined under any other methods given in S. 25 of the Customs Act, 1969 that made recourse to S. 25(9) of the Customs Act, 1969 necessary---High Court set aside impugned valuation orders and directed Collector Customs to pass fresh order as per law and guidelines provided by the High Court---Constitutional petitions were allowed, accordingly.

Shafqat Mehmood Chohan, Mian Muhammad Athar, Toufique Asif, Muhammad Umer Riaz, Ch. Abdul Aziz, Naseem Sikandar and Niaz Ullah Niazi for Petitioners.

Dr. Rana M. Shamim, Raja Muhammad Iqbal, Mujeeb-ur-Rehman, Izhar-ul-Haque, Amin Feroze Khan, Muhammad Abid Raja, D.A.G. and Muhammad Anwar Ch, Deputy Collector Customs for Respondents.

Date of hearing: 23rd May, 2012.

2013 P T D 875

[Islamabad High Court]

Before Muhammad Anwar Khan Kasi, J

OCEAN PAKISTAN LTD.

Versus

FEDERATION OF PAKISTAN and others

C.S. No.51 and C.M. No.218 of 2012, decided on 19th February, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5-A), 122(9) & 227(i)---Civil Procedure Code (V of 1908), O.VII, R.11(d) & O.XXXIX, Rr.1, 2---Contract Act (IX of 1872), S.73---Specific Relief Act (I of 1877), Ss.42 & 54---Suit for declaration, permanent injunction, damages and set-off---Transfer of working interest and rights in petroleum concession agreement by plaintiff---Show-cause notice issued under S. 122(9) read with S.122(5-A) of Income Tax Ordinance, 2001 demanding from plaintiff income tax payable on such transfer---Plaintiff's plea was that new owner of such interest was liable for due taxes and such transfer of interest for being intangible was not taxable---Application by revenue-authority under O.VII, R. 11, C.P.C., seeking rejection of plaint for being barred by law---Validity---High Court had already dismissed plaintiff's constitutional petition challenging such notice/demand by observing that same was not mala fide, without jurisdiction or void---Supreme Court had upheld such judgment of High Court---Plaintiff's second constitutional petition for suspending such notice/demand had already been dismissed by High Court---Plaintiff had failed to establish before High Court mala fides or want of jurisdiction on part of revenue-authority in issuing such notice/demand---Plaintiff's appeal against such notice/demand was still pending before Income Tax Appellate Authority, and against its decision he could avail remedies under Income Tax Ordinance, 2001---Question as to whether such working interest was immoveable property or intangible asset, would be decided by Inland Revenue Authorities---High Court rejected plaint in circumstances.

1973 SCMR 282; 2003 YLR 196; 2012 PTD 1590; 2009 SCMR 1279; PLD 1994 SC 693 and 2002 SCMR 1694 ref.

M. Bilal, Sr. Advocate Supreme Court, Tariq Shamim and Babar Bilal Advocate Supreme Courts for Applicants.

Mansoor Usman for Respondent.

2013 P T D 1026

[Islamabad High Court]

Before Riaz Ahmad Khan and Noor-ul-Haq N. Qureshi, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE

Versus

Messrs HUSSAIN AND COMPANY, ISLAMABAD

Sales Tax Appeal No.36 of 2003, heard on 4th April, 2013.

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

----S. 47---General Clauses Act, (X of 1897), S.6---Appeal to High Court---Maintainability---Retrospective effect of amendment in fiscal legislation---Scope---Persons authorized to file appeal on behalf of Department---Scope---Contention of the tax-payer/respondent was that departmental appeal was not maintainable as it was filed in the name of the Collector but was signed by the Law Officer---Contention of the department was that present appeal would have not been maintainable under the old law but said defect had been cured by way of amendment whereby S. 47(11) of the Sales Tax Act, 1990 was promulgated---Validity---No provision of law or any guideline through any notification had been introduced whereby Law Officer was entitled to institute or file an appeal before the High Court under S. 47 of the Act as it stood in the year 2002---Appeal before the High Court could only be filed on behalf of Revenue or by the Collector himself and no one else, however, the Collector or any of the authorized officer not below rank of Additional Collector could institute or file such appeal--- Contention that S. 47(11) of the Sales Tax Act, 1990 was retrospective in nature and was applicable to all pending cases before the High Court was untenable as statutory provisions, ever relating to fiscal laws, were assumed to be prospective in nature unless specifically manifested to be retrospective---Newly promulgated S. 47(11) of the Sales Tax Act, 1990 by itself did not manifest itself as having retrospective effect, either directly or impliedly, and S. 6 of the General Clauses Act, 1897 also protected such legal analogy---Law Officer, was therefore, not competent to file the present appeal, which was accordingly dismissed.

(b) Interpretation of Statutes---

----Retrospective effect of legislation---Statutory provisions, even those relating to fiscal laws, assumed to be prospective in nature unless specifically the same were manifested to be retrospective.

Farhat Nawaz Lodhi for Petitioner.

Ayaz Shoukat for Respondents.

Date of hearing: 4th April, 2013.

2013 P T D 1037

[Islamabad High Court]

Before Riaz Ahmad Khan and Noor-ul-Haq N. Qureshi, JJ

Messrs PREMIER KADANWARI DEVELOPMENT COMPANY LTD.

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, ISLAMABAD

Sales Tax Appeal No.38 of 2003, heard on 4th April, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 34 & 33---Collection and payment of Sales Tax on Natural Gas Rules, 1999 [S.R.O. 1040(I)/99, dated 14th September, 1999], R.4(2)---Amnesty under S.R.O. 463(I)/2007 dated 9-6-2007, effect of---Interpretation---Appeal before High Court---Additional tax and penalty, imposition of---Taxpayer, a Natural Gas Exploration, Production and Supply Company, impugned order of Adjudicating Officer, and Appellate Tribunal whereby taxpayer was found to have evaded payment of sales tax for the month after it supplied gas and a finding was given to the effect that R. 4(2) of the Collection and Payment of Sales Tax on Natural Gas Rules, 1999 (S.R.O. 1040(I)/99, dated 14th September, 1999), was not applicable to the case of the taxpayer as it applied only to those Gas Companies which sold gas to end-user/consumer---Additional tax and penalty were ordered to be recovered from the taxpayer in terms of Ss. 33 and 34 of the Sales Tax Act, 1990---Contention of the taxpayer was that R. 4(2) of the Collection and Payment of Sales Tax on Natural Gas Rules, 1999 (S.R.O. 1040(I)/99, dated 14th September, 1999), the taxpayer had accordingly paid the due sales tax by the 15th day of the second month following the month in which supplies were made---Validity---S.R.O. 463(I)/2007 dated 9-6-2007 was introduced by the Federal Government which provided amnesty for sales tax defaulters, and taxpayer who had paid the fixed rate due from him was as much entitled to the amnesty contemplated in the said S.R.O., as any other registered person, who paid the tax amount after issuance of the said S.R.O.---Taxpayer, in the present case, had paid the principal amount but the same had not been paid on or before the date fixed, however, the forums below had erred in law by not giving the taxpayer the benefit of the said amnesty under the S.R.O.---High Court set aside orders of forums below and set aside the imposition of penalty and additional tax---Appeal was allowed , in circumstances.

(2006) 93 Tax 435 (sic) rel.

Hafiz Muhammad Idrees for Petitioner.

Farhat Nawaz Lodhi for Respondent.

Date of hearing: 4th April, 2013.

2013 P T D 1046

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

PUNJAB BEVERAGES COMPANY (PVT.) LTD. through Fayyaz Hussain

Versus

PAKISTAN through Secretary Ministry of Finance, Economic Affairs and 3 others

Writ Petition No.51 of 2006, decided on 10th April, 2013.

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

----Ss. 6(3) & 6(1)---S.R.O 650(I)/2005 dated 1-7-2005---Constitution of Pakistan, Art. 199---Constitutional petition---Adjustment of duties of excise---Variation of duty structure by the Federal Board of Revenue under S. 6(3) of the Federal Excise Act, 2005---Delegated authority---Exercise of discretion by executive---Scope---Petitioner, a beverages company, contended that vide. notification issued by the Federal Board of Revenue, exercising discretion under S. 6(3) of the Federal Excise Act, 2005, it disallowed adjustment of duty on concentrates in all forms, which had the effect that the duty paid by the petitioner on the concentrate used by the petitioner was no longer deductible at the time of sale, thereby the entire burden of the excise duty , at time of input and at time of output of produced goods, was shifted on the petitioner; that S. 6(1) Federal Excise Act, 2005 conferred a vested statutory right upon the petitioner to deduct excise duty, which could not be taken away by S. 6(3) of the Act, and that S. 6(3) of the Act was therefore, ultra vires the Constitution as the Federal Board of Revenue was not competent to exercise legislative authority---Validity---Legislation was the exclusive domain of the legislature and even the Legislature could not delegate the power to the executive but the Legislature had no authority or domain to ensure the implementation of the intent of the Legislature at the grass root level, which was the domain of the Executive---Legislature, in the present case, performed its duty through the promulgation of the Federal Excise Act, 2005, wherein guidelines and principles were laid down for the collection of excise duty in accordance with the mandate of the Act, and it was left to the discretion of the Executive, that was, the Federal Board of Revenue, through the impugned S. 6(3) of the Act, to disallow or restrict wholly or partly the adjustment of excise duty already paid on input goods at time of calculation of duty on manufactured goods from the input goods---Subsequent notification issued by the FBR was within the mandate given to it by the Legislature, and in the exercise of said mandate, the FBR had not done any legislation but had exercised discretion on the Executive side for the calculation of the excise duty, and on such score, exercise of delegated authority under S.6(3) of the Federal Excise Act, 2005 was not unconstitutional or illegal---Petitioner had not been singled out and had been treated like other beverage companies, and there was thus no violation of its fundamental rights---Federal Board of Revenue, in the present case, had acted fairly and have exercised authority in a just manner---Constitutional petition being without merit, was dismissed, in circumstances.

PLD 1965 DACCA 117; Gul Cooking Oil and Ghee v. Pakistan Custom PLD 2007 Pesh. 39; Allied Bank Limited v. District Officer Revenue and others PLD 2011 Lah. 402; Noorani Traders v. Pakistan Civil Aviation Authority PLD 2002 Kar. 83; Airport Services Limited v. Manager Airport 1992 SCMR 2268; Collector of Central Excise Land Custom v. Aziz Ullah PLD 1970 SC 439 and "Shahid Mehmood v. Faisal 2011 SCMR 55 and PLD 2001 SC 811 distinguished.

(b) Constitution of Pakistan---

----Arts. 7, 8 & 77---State and Fundamental Rights---Levy of taxes, duties etc by State---Scope stated.

Individuals created the State and it is the responsibility of the State to protect itself from the aggression of other States, to organize a political body to run its affairs and protect individuals. The State is not expected to generate funds like a business concern to discharge its obligations and has to collect the resources from the individuals who being members of an organized society, that is, the State are expected to help out the State in the discharge of its duties, therefore, the levy of a particular duty on any product by the State is neither against the fundamental rights guaranteed under the Constitution nor it is unIslamic.

Muhammad Afzal Siddiqui and Hamid Ahmed for Petitioners.

Babar Bilal and Ms. Shazia Bilal for Respondents Nos. 2 and 3.

Javed Iqbal, Standing Counsel for Respondent No.1.

Date of hearing 7th March, 2013.

2013 P T D 1389

[Islamabad High Court]

Before Iqbal Hameedur Rehman, C.J. and Noor-ul-Haq N. Qureshi, J

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

SARHAD WOOLLEN MILLS (PVT.) LTD.

Tax Appeal No.152 of 2000, decided on 12th December, 2011.

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

----S. 136---Limitation Act (IX of 1908), S. 5---Appeal to High Court---Delay, condonation of---Scope---Defaulting party would be bound to seek condonation of delay by making an application explaining each's delay with plausible reasons duly supported by affidavit.

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

----S. 136---Appeal to High Court---Delay of one year and nine months, condonation of---Impugned order dated 21-5-1998 alleged by appellant received by him on 14-12-1999, whereas appeal was filed on 12-2-2000---Validity---Appellant had filed appeal without application for condonation of such delay---Law would favour vigilant and not indolent---Delay in filing appeal had occurred due to indolence and negligence on part of appellant, for which opposite party would not be penalized---High Court dismissed appeal for being time barred.

Nazakat Ali v. WAPDA through Manager and others 2004 SCMR 145; Amanullah Soomro v. P.I.A. through Managing Director/Chairman and another 2011 SCMR 1341 and Bashir Ahmad v. Muhammad Sharif and 4 others PLD 2001 SC 228 rel.

(c) Administration of justice---

----Law would support vigilant and not indolent.

Nazakat Ali v. WAPDA through Manager and others 2004 SCMR 145; Amanullah Soomro v. P.I.A. through Managing Director/Chairman and another 2011 SCMR 1341 and Bashir Ahmad v. Muhammad Sharif and 4 others PLD 2001 SC 228 rel.

Hafiz Munawar Iqbal for Appellant.

Date of hearing: 12th December, 2011.

2013 P T D 1400

[Islamabad High Court]

Before Muhammad Anwar Khan Kasi, J

SME BANK LTD.

Versus

CHAIRMAN APPELLATE AUTHORITY and another

Writ Petition No.314 of 2012, decided on 6th February, 2012.

Employees' Old Age Benefits Act (XVI of 1976)---

----Ss.9 & 47(e) [as omitted by Finance Act (I of 2008) & 47(f)---S.R.O. No.898(I)/2001, dated 29-12-2001---Denial of bank to register itself under Employees' Old Age Benefits Act, 1976 and pay contribution thereunder for its employees---Bank claimed to be covered by S.47(f) of Employees Old Age Benefits Act, 1976 and not obliged to make such contributions as same was created by Regional Development Finance Corporation and Small Business Finance Corporation (Amalgamation and Conversion) Ordinance, 2001, and was being managed, controlled and financed by Pakistan Government through its Ministry of Finance---Validity---Omission of Cl. (f) of S.47 of said Act by Finance Act, 2008 made applicable the Act to all Banks, Banking Companies and Financial Institutions w.e.f. 1-7-2008---Bank for being registered and operating in name of a Bank was not a statutory body, rather same referred to as a company in S.R.O. No.898(I)/2001, dated 29-12-2001, thus, was subject to the Act---Bank was, held to be bound to abide by terms and conditions of Employees Old Age Benefits Act, 1976 and make contributions thereunder.

Abdul Basir Qureshi, Advocate Supreme Court for the Petitioner.

None for the Respondent.

Date of hearing: 6th February, 2012.

2013 P T D 1598

[Islamabad High Court]

Before Muhammad Anwar Khan Kasi, C.J. and Shaukat Aziz Siddiqui, J

WARID TELECOM

Versus

COMMISSIONER INLAND REVENUE and others

I.C.A. No.552 of 2013, decided on 28th March, 2013.

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

----Ss. 120, 177 [as amended by Finance Act (XVI of 2010)] & 214(c)---Constitution of Pakistan, Art. 199---Constitutional petition---Self­-assessment finalized under S. 120 of Income Tax Ordinance, 2001---Notice under S.177(1) of Ordinance, 2001 issued to assessee requiring him to produce record/documents pertaining to such assessment for conducting tax audit by Commissioner---Assessee's plea was that self-assessment once finalized ' could not be reopened---Validity---Commissioner under 5.177 of Income Tax Ordinance, 2001 had power to conduct tax audit to verify assessment---Object of S. 177 of the Ordinance was not to frustrate self-assessment scheme---Section 214(c) of Income Tax Ordinance, 2001 empowered Board with a view to have a check upon subordinate authorities to confirm that assessment were properly made---Section 177 of the Ordinance was not violative of provisions of the Constitution---Constitutional petition was dismissed in circumstances.

(b) Interpretation of statutes---

----Fiscal statute---Procedural provisions would be construed in a manner to advance object behind thereof.

Ahmed Bashir and Kazim Jan for Appellant.

None for Respondents.

Date of hearing: 28th March, 2013.

2013 P T D 1620

[Islamabad High Court]

Before Riaz Ahmad Khan, J

OMV PAKISTAN EXPLORATION

Versus

COMMISSIONER OF INLAND REVENUE and others

Writ Petition No.139 of 2012, decided on 12th March, 2013.

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

----Ss. 177 [as amended by Finance Act (XVI of 2010)] & 214C---Constitution of Pakistan, Arts. 25 & 199---Constitutional petition---Self-assessment case for selection of tax audit---Issuance of notice by Commissioner Inland Revenue to petitioner to provide record/books of accounts pertaining to relevant tax year for conducting tax audit---Petitioner's plea was that power to select case for tax audit vested in Federal Board of Revenue by virtue of S. 214(c) of Income Tax Ordinance, 2001, thus, Commissioner could not issue such notice without prior selection of his case by Board; and that Ss. 177 & 214(c) of the Ordinance, were violative of Art. 25 of the Constitution---Validity---Word "tax audit" would mean that office conducting audit would have to make reassessment by verifying books, vouchers and record produced by taxpayer---Commissioner under S. 177 of Ordinance as amended by Finance Act, 2010 after going through return filed by assessee, if there was any doubt, before calling for record/documents was bound to give reasons therefor

and communicate same to assessee in advance - Intent and

object of S. 177 of Ordinance could be adjudged with reference to S.120 thereof---Reverification of deemed assessment would not violate any right of assessee---Commissioner could not exercise his power to select case for audit in discriminatory manner, which if so exercised could be struck down by High Court---Provisions of S. 177 of Ordinance, 2001 neither ambiguous nor discriminatory nor its object being to frustrate self-assessment scheme---Object of S.214(c) of Income Tax Ordinance, 2001 being to keep an eye/check on tax regime, but not to give power to Federal Board to call for record of any person---Sections 177 & 214(c) of Ordinance were two independent sections and S.214(c) was not subservient to S.177---Principles---High Court dismissed petition.

Chenone Stores Ltd. v. The Federal Board of Revenue and others 2012 PTD 1815 ref.

Federation of Pakistan and others v. Shaukat Ali Mian and others PLD 1999 SC 1026 rel.

(b) Interpretation of statutes---

----Fiscal statute---Ordinary/natural meaning of words used in taxing statutes would be preferred, but in case of failure of such meanings to make any sense, attempt could be made to discover other appropriate meanings---Principles.

In a taxing statute, there should be no departure from general rule that words used in a statute must first be given their ordinary and natural meaning. It is only when such an ordinary meaning does not make sense, then resort can be made to discovering other appropriate meanings. While construing and interpreting fiscal statutes, one must look to the words of the statute and interpret them in the light of what is clearly expressed and nothing can be implied which not expressed.

PLD 1990 SC 68 rel.

(c) Words and phrases---

----"Audit"---Meanings stated.

Black's Law Dictionary ref.

(d) Words and phrases---

----"Tax audit"---Meanings stated.

Black's Law Dictionary ref.

(e) Interpretation of statutes---

----Fiscal statute---Procedural provisions would be construed in a manner to effectuate levy of tax and advance the object behind thereof.

(f) Interpretation of statutes---

----Fiscal statute---Legislative history, tracing and consideration of---Object stated.

Legislative history of a fiscal statute can be traced and considered to understand its scope, but such effort is not required to be made when there is no ambiguity in the statute itself.

(g) Interpretation of statutes---

----Fiscal statute---Provisions levying taxes would not be interpreted in a manner extending their implication beyond clear import of language used therein or enlarging their operation to attract matters not specifically provided therein.

PLD 1990 SC 332 rel.

Sirdar Ahmed Jamal Sukhera, Ayyaz Shaukat M. Raheel Kamran Sheikh, Boshir Hussain Accountant (in Writ Petition No.731 of 2011), Hafiz Muhammad Idrees, in his own petitions as well as on behalf of Ahmed Bashir, Atif Waheed Sh., Shahbaz Butt, Ch. Naeem-ul-Haq, Syed Tanseer Bukhari, Mian Abdul Ghaffar, Sheikh Azfar Ameen for Petitioners.

Tariq Mahmood Jehangir D.A.G. for Attorney General for Pakistan, Saeed Ahmed Zaidi, Farhat Zafar, Babar Bilal, Muhammad Bilal, Hafiz Munawar Iqbal, Muhammad Irshad Chaudhary, Saleem Raza Qureshi, Farakh Aftab Chaudhary, Mian Touqeer Aslam and Syed Touqeer Bukhari, for Respondents.

Date of hearing: 23rd January, 2013.

2013 P T D 1895

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

Khawaja SAAD SALEEM

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.1476 of 2013, decided on 19th June, 2013.

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

---Ss. 16 & 19---S.R.O. 172(I)/2013 dated 5-3-2013---Constitution of Pakistan, Art. 199---Constitutional petition---Amnesty Scheme for smuggled/non-duty paid vehicles whereby such vehicles could be released on payment of redemption fine along with duty and taxes---Legality---Amnesty Scheme in question was introduced through S.R.O. 172(I)/2013 dated 5-3-2013---Amnesty Scheme was discriminatory as persons importing motor vehicles through the normal scheme had not been extended the tax/duty concessions given in the Amnesty Scheme---Amnesty Scheme extended the advantage of extra depreciation allowance benefit to owners of smuggled/non-duty paid motor vehicles as under the normal scheme, a person was allowed to import motor vehicles up-to a maximum of three (3) years old and could claim depreciation allowance up-to a maximum of forty eight percent (48%)---However, under the Amnesty Scheme, no age limit had been set for smuggled/non-duty paid motor vehicles and depreciation allowance up-to 60% and 72% (depending on the category and age of car) could be claimed thereby again giving undue advantage to owners of smuggled vehicles in the form of extra depreciation reward of even up-to 100%,subject to the trifling payment of US$500 or Rs.100,000 as made applicable---Persons who had violated the laws of the country by smuggling vehicles of their choice and not paying taxes/duties had been incentivized to smuggle even more vehicles during the subsistence of the Amnesty Scheme, not only without any imposition of allowable age restriction applying on them but also allowing a more relaxed registration/regularization scheme compared to the normal scheme in vogue---Amnesty Scheme also seriously affected the local car market and automobile manufacturers by disrupting the competitive market and creating a parallel black or grey market for vehicles and put the future prospects of local auto industry in jeopardy as they could not place effective long term policies fearing anti-industry schemes like the present Amnesty Scheme to harm their returns---Road worthiness and safety of smuggled cars was also a cause of concern coupled with their higher maintenance costs---Under the Amnesty Scheme, the smuggled cars were not subjected to road worthiness or emission control tests as no criteria for allowable age limit had been set in contrast to vehicles imported through regular import channel---Vehicles which were 15 to 20 years old had also been cleared under the Amnesty Scheme which were not only an environmental hazard but would also increase the import bill for fuel and spare parts resulting in the loss of much needed foreign exchange---Although the Amnesty Scheme was meant only for vehicles that were already smuggled into Pakistan and were being used without payment of due duties/taxes, but reportedly a large number of vehicles were smuggled into Pakistan for regularization under the amnesty scheme after the scheme was launched---Furthermore, vehicles which were already confiscated by the custom authorities had also been released against payment of duty under the Amnesty Scheme whereas the auction of such released vehicles would have yielded quadruple the amount recovered via the Amnesty Scheme---Reportedly a large number of vehicles, duty of which had been received under the Amnesty Scheme, were still not brought in Pakistan and were parked at foreign ports and borders for making entry into Pakistan---S.R.O. 172(I)/2013 dated 5-3-2013 by which Amnesty Scheme in question was introduced was bad law because it favoured tax evaders and put honest taxpayers at a disadvantage; it discriminated against law abiding and taxpaying citizens and discouraged them from gaining confidence in the legal system, especially in the tax regime which was to be administered justly and fairly across the board; it amounted to approving the crime of tax evasion; it did not provide a level playing field for all stakeholders, especially the local automobile manufacturers to benefit from the Amnesty Scheme; it promoted anti-competitive market behavior by saturating the market with cheaper, older and high maintenance vehicles---Considering the fact that Pakistan's tax to GDP ratio was abysmal, such unwarranted, capricious and senseless Amnesty Scheme would only further encourage the rampant culture of tax evasion, and it appeared more akin to the State settling/compromising with the tax evaders, with the State positioned in a weaker bargaining position---Failure of State institutions to apprehend the violators and subject them to the law of the land must not be an excuse to allow for amnesty schemes to prevail and again suggested a failure of the state to establish its writ and protect its boundaries from illegal transit of goods---Amnesty Scheme was benefitting only a few influential, tax evading citizens and corrupt government officials at a time when the country required a level playing field where the protected stakeholders were also taxed similar to the common man---Such schemes, announced at random, were against Art. 25 of the Constitution as they violated the guarantee against arbitrary decisions under the whims and fancies of the rulers in power---Such type of schemes encouraged illegality in the financial sphere, by promising to turn 'black money into white'---Competition Commission of Pakistan also warned the Federal Government and Federal Board of Revenue about the pessimistic consequences of the Amnesty Scheme in question but no credence was given by the persons who had conspired to yield bounties for themselves at the cost of interest of the country---Electronic and print media also raised questions about the vindication of impugned scheme but they were ignored by officials---Report of the Federal Tax Ombudsman stated that the Amnesty Scheme had caused loss of billions of rupees to the national exchequer; that a total 1405 vehicles were cleared on only 61 Identification Cards and (in some cases) 50 vehicles were cleared on just one Identification Card; that several hundred cars, which were still parked at auction yards of foreign countries, had been cleared in the country under the Amnesty Scheme indicating mega corruption---Beneficiaries of the Amnesty Scheme were exempted from questioning by the National Accountability Bureau (NAB) and Federal Investigation Agency (FIA)---Amnesty Scheme besides being discriminatory had also been applied in a discriminatory manner to achieve certain political objectives with mala fides---Amnesty Scheme was inconsistent with Art. 25 of the Constitution as it had created inter alia an unreasonable classification, having no rational nexus with the object of the amnesty---Impugned Amnesty Scheme with S.R.O. No.172(I)/2013 dated 5-3-2013 were declared to be illegal, unconstitutional, void ab-initio, discriminatory by High Court and were accordingly set-aside---High Court directed that all cars registered under the Amnesty Scheme must be ceased and reverted back to pre-S.R.O. position; that legal action by way of criminal proceedings should be initiated against all government officials including Chairman, Federal Board of Revenue involved in introducing, approving and executing the Amnesty Scheme; that a committee might be established to examine the corrupt practices and suggest a code of ethics to be strictly complied with by all government departments; that vehicles smuggled after announcement of Amnesty Scheme should be confiscated forthwith and entry of vehicles which had still not been brought to Pakistan should be banned, and if they were still brought, then they should be confiscated and auctioned in accordance with law; that all vehicles above the age of three years might also be confiscated; that tighter border controls must be placed to ensure that smuggling was prevented and all violators were severely punished; that in future no government department should be allowed to import luxury vehicles and all the departments might be directed to use locally manufactured vehicles, but in order to improve the standard of manufacturing/assembling of vehicles in Pakistan, some remedial steps might be taken; that there should be a complete ban on government, semi-government departments, statutory bodies/organizations and corporations to import any kind of luxury vehicle on any pretext whatsoever, but, jeeps (SUVs) like vehicles used for defence purpose and for law enforcement agencies, were exempted---Constitutional petition was disposed of accordingly.

(b) Constitution of Pakistan---

----Art. 25---Equality of citizens---Reasonable classification based on an intelligible differentia---Scope---Equal protection of law contemplated that persons similarly situated or similarly placed were to be treated alike both in privileges conferred and liabilities imposed----However, a law applying to one person or one class of persons might be constitutionally valid if there was sufficient basis or reason for it, but a classification which was arbitrary and was not founded on any rational basis was no classification as to warrant its exclusion from the mischief of Art. 25 of the Constitution---To make a classification reasonable, it should be based on an intelligible differentia which distinguished persons or things that were grouped together from those who had been left out and such differentia must have a rational nexus to the object sought to be achieved by such classification.

(c) Constitution of Pakistan---

----Art. 25---Equality of citizens---Reasonable classification based on an intelligible differentia---"Intelligible differentia"---Meaning---"Intelligible differentia" meant that in the case of law differentiating between two sets of people or objects, all such differentiations should be easily understood as logical and lucid and it should not be artificial or contrived---Intelligible differentia distinguished persons or things from other person or things, who had been left out.

Syed Javed Akbar and M. Imran Amir for Petitioners.

Tariq Mehmood Jehangiri, learned D.A.-G., Ahmad Hassan Rana, Advocate for FBR along with Muhammad Saleem, Secretary, FBR for Respondents.

Date of decision: 19th June, 2013.

2013 P T D 2151

[Islamabad High Court]

Before Muhammad Anwar Khan Kasi, C.J. and Noor-ul-Haq N. Qureshi, J

PAK TELECOM MOBILE LTD. and others

Versus

FEDERAL BOARD OF REVENUE through its Chairman, Islamabad and others

I.C.As. Nos.183-W, 184-W, 211-W, to 217-W, 221-W to 223-W, 226-W to 229-W, 239, 240, 271-W and 330-W, decided on 25-4-2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122(9), 122(5-A) & 210---Constitution of Pakistan, Art.199---Law Reforms Ordinance (XII of 1972), S. 3---Intra-court appeal---Assessment order, amendment of---Issuance of show-cause notice by Additional Commissioner under S. 122(9) read with S.122(5-A) of Income Tax Ordinance, 2001---Taxpayer's plea was that his return filed for relevant year was deemed as assessment order passed by Commissioner under S. 120 of Income Tax Ordinance, 2001, thus, neither Additional Commissioner was competent to issue impugned notice nor could Commissioner delegate his powers of amendment of assessment order to Additional Commissioner---Dismissal of constitutional petition by High Court---Validity---Return of income tax deemed to be an assessment order by fiction of law could be amended under S. 122(5A) of Income Tax Ordinance, 2001 by Commissioner---Commissioner could delegate his powers under S. 122(5A) of the Ordinance to an officer not below the rank of Additional Commissioner, to whom same had been validly delegated for being supervisory and administrative powers in nature---Additional Commissioner in exercise of his such delegated powers could correct an assessment, if found same to be prejudicial to interest of Revenue---Additional Commissioner was competent to issue impugned notice and decide taxpayer's objections raised in his reply including question of limitation---Taxpayer having an adequate remedy under the Ordinance, proceedings against taxpayer had been initiated on basis of impugned notice, thus, intra-court appeal was not competent under S. 3(2) of Law Reforms Ordinance, 1972---Intra-court Appeal was dismissed in circumstances.

2003 PTD 734; 2009 PTD 23; 1971 PTD 1; 1999 PTD 1892; 1994 SCMR 2232; 2002 PTD 679; 1998 PTD 2012; 1981 PTD 169; 2006 PTD 2445; 2009 SCMR 1279; 2010 PTD 1506; 2012 SCMR 1151; 1983 CLC 1352; PLD 1983 Lah. 167; PLD 1968 Lah. 1455; 1990 CLC 1693; 1980 SCMR 720; 1990 CLC 1086; Messrs Ocean Pakistan Ltd. v. Federal Board of Revenue, Islamabad and others Writ Petition No.2959 of 2011 and PLD 1984 SC 344 ref.

Nasim Sikandar, Raja Nowsherwan Akhtar, Muhammad Zahid Mahboob Khan, Nasar Ahmad, Sardar Ahmad Jamal Sukhera, Hafiz M. Idrees, M. Naseem Khan for Appellants.

Hafiz Munawar Iqbal, Abdul Khaliq Thind, Saeed Ahmed Zaidi, Muhammad Bilal, Babar Bilal and Shazia Bilal, for Respondents.

Dates of hearing: 23rd and 25th April, 2013.

2013 P T D 1

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Farooq Ali Channa, JJ

COMMISSIONER INLAND REVENUE, KARACHI

Versus

Messrs CENTRE FOR MANAGEMENT SCIENCES, KARACHI

I.T.R.A. No.657 and C.M. No.728 of 2010, decided on 5th September, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.2(41)(d), 21(c), 107 & 152---United Kingdom/Pakistan Double Taxation Convention 1986---Non-resident company having no permanent establishment in Pakistan---Addition to income of such company made under S.21 of Income Tax Ordinance, 2001 for non-deduction of withholding tax on payment to non-resident under S.152 of the said Ordinance---Validity---Record showed that company in question was resident of United Kingdom and had no permanent establishment in Pakistan---As per Art. 7 of United Kingdom/Pakistan Double Taxation Convention, 1986 commercial/business profit received by such company from Pakistan was exempt from tax in Pakistan---Impugned addition to income of company for being for non-deduction of tax was unjustified---Reference application was dismissed in circum-stances.

S. Mohsin Imam for Applicant.

2013 P T D 155

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Farooq Ali Channa, JJ

Messrs GLOBAL INTERNATIONAL through Managing Partner

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad 4 others

Constitutional Petition No.D-4081 of 2011, decided on 20th September, 2012.

Customs Act (IV of 1969)---

----Ss.15 & 32---Constitution of Pakistan, Art. 199---Constitutional petition---Mis-declaration of goods, offence of---Fixation of fine in lieu of confiscation of goods by invoking provisions of paragraph-I, clauses (a) to (g) of table provided in S.R.O. 499(I)/2009, dated 13-6-2006---Pendency of appeal against order-in-original before Appellate Authority---Plea of petitioner was that S.32 of Customs Act, 1969 had been excluded from the purview of S.15 of the same Act, therefore revenue authorities right be directed not to invoke provisions of Paragraph-I, Clauses (a) to (g) of table provided in S.R.O. 499(I)/ 2009 dated 13-6-2009, which otherwise had become redundant---Plea of revenue authorities that petitioner had neither sought such relief in constitutional petition nor raised same before adjudicating authority, therefore, he could raise the same before Appellate Authority before whom his appeal was still pending---Validity---High Court with consent of parties disposed of constitutional petition by directing petitioner to raise such ground before Appellate Authority, who after hearing parties and considering same would decide appeal in accordance with law.

Mian Abdul Ghaffar for Petitioner.

Javed Faruqi DAG for Respondents.

Ilyas Ehsan, Appraising Officer, Customs for the State.

2013 P T D 210

[Sindh High Court]

Before Aqeel Ahmed Abbasi, J

KIFAYATULLAH

Versus

SPECIAL JUDGE CUSTOMS AND TAXATION, KARACHI and another

Special Criminal Appeal No.5 of 2012, decided on 1st October, 2012.

Customs Act (IV of 1969)---

----Ss.156(1), 179, 180, 181 & 185-C---Auction of confiscated vehicle on basis of order of Special Judge (Customs and Taxation) passed during pendency of appeal filed against order-in-original before Appellate Tribunal---Validity---Such order of Special Judge was erroneous in law---High Court set aside impugned order while allowing appellant to seek release of confiscated vehicle from adjudicating authority or such Tribunal.

Khuda-e-Nazar v. The State 1987 MLD 1536 rel.

Government of Pakistan v. Mahmood Ahmed Qureshi and others 2002 SCMR 1527 ref.

Dilharam Shaheen for Appellant.

Jawaid Farooqui, D.A.G., for Respondent.

Date of hearing: 1st October, 2012.

2013 P T D 368

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

COMMISSIONER INLAND REVENUE, ZONE-IV

Versus

Messrs PAKISTAN SERVICES LIMITED

I.T.R.A. No.43 of 2012, decided on 15th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S.171---Refund for adjustment against tax liability---Limitation---Refund would become due and stood determined on date of receipt of order passed by Appellate Authority including the Commissioner (Appeals) or Appellate Tribunal or High Court or the Supreme Court---Principles.

Jawaid Farooqi for Applicant.

Abid H. Shaban for Respondent.

Date of hearing: 15th November, 2012.

2013 P T D 387

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

COMMISSIONER INLAND REVENUE, ZONE-III, KARACHI

Versus

Messrs GENERAL TYRE AND RUBBER CO. OF PAKISTAN LTD., KARACHI

I.T.R.A. No.80 of 2012, decided on 4th December, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.182(1) & 133---Penalty for failure to furnish a return or statement----Reference to High Court---"Tax payable" meaning of----Penalty under S. 182(1), Income Tax Ordinance, 2001 had been imposed upon the taxpayer which was set aside concurrently inter alia on the ground, that there was no tax payable by the taxpayer therefore, no penalty could be imposed---Validity----Penalty had been provided by the legislature in cases where any person, without reasonable excuse, failed to furnish return of income or wealth statement for any tax year within the time allowed under Income Tax Ordinance, 2001----Amount of such penalty was required to be calculated on basis of tax payable in respect of that tax year, and there was no reference to chargeability of tax in the said section---In the present case, it was on record that since there was no tax payable along with return by the taxpayer, thus the provision of S. 182 of the Income Tax Ordinance, 2001 was not applicable to the facts of the case---Forums below had correctly decided in favour of the taxpayer---Reference was dismissed.

Muhammad Siddiq Mirza for Applicant.

Nemo for Respondent.

Date of hearing: 4th December, 2012.

2013 P T D 392

[Sindh High Court]

Before Faisal Arab and Aqeel Ahmed Abbasi, JJ

COLLECTOR OF CUSTOMS through

Additional Collector of Customs, Karachi

Versus

Messrs QASIM INTERNATIONAL CONTAINER TERMINAL (PAK) LTD., Special Customs Reference Application No.330 of 2011, decided on 25th November, 2012.

Customs Act (IV of 1969)---

----S.196---Reference application---Jurisdiction of High Court---Scope stated.

Scope of reference application in terms of section 196 of the Customs Act, 1969 is limited only to the extent whereby some question of law arising from the order passed by the Appellate Tribunal is referred to the High Court for its opinion, whereas question of fact, and the finding recorded by the Tribunal thereon, unless perverse or erroneous in fact and law, cannot be interfered by the High Court in its referral jurisdiction.

Sibtain Mehmood for Applicant.

Ilyas Ahsan, Customs Officer for Respondent.

Date of hearing: 25th November, 2011.

2013 P T D 446

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

Messrs DEWAN CEMENT LIMITED

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and 4 others

Constitutional Petition No.D-4040 of 2011, decided on 28th November, 2012.

Customs Act (IV of 1969)---

----S.202---Constitution of Pakistan, Art.199---Constitutional petition---Recovery proceedings---Relief sought in constitutional jurisdiction of High Court---Contemptuous conduct of petitioner---Non-compliance with directions of Appellate Tribunal and consent order of High Court---Effect---Customs authorities sought recovery of outstanding duty and taxes against company (petitioner) and as a consequence issued Warrant of attachment---Appellate Tribunal declined to grant stay against demand made by customs authorities and directed company to deposit outstanding amount within 15 days in shape of bank guarantee---Company instead of complying with directions of Appellate Tribunal, challenged recovery proceedings before the High Court through constitutional petition, which was disposed of with consent of both the parties and company was directed to submit a bank guarantee to the extent of 50% of demand made by authorities---Company did not comply with said directions of High Court and filed another constitutional petition seeking refund or adjustment of alleged sale proceeds in respect of its goods auctioned by customs authorities---Company filed present constitutional petition whereby not only warrant of attachment issued by customs authorities was impugned but a declaration was also sought to the effect that company was entitled to the alleged sale proceeds of its goods auctioned by customs authorities---Company had filed present constitutional petition in total disregard of directions of Appellate Tribunal and that of High Court, with an aim not to make any payment towards its admitted outstanding tax liability---Such conduct of company, besides being dubious, was also contemptuous in nature, which disentitled it from seeking any discretionary relief from the High Court in its constitutional jurisdiction---Company was unable to show as to how impugned recovery proceedings were illegal, particularly in absence of any stay by a competent forum and in view of consent order of High Court---Constitutional petition was dismissed accordingly.

Omair Nisar for Petitioner.

S. Mohsin Imam, Dilawer Hussain, Standing Counsel and Muhammad Farooq Khan, Law Officer for Respondents.

Date of hearing: 28th November, 2012.

2013 P T D 471

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Farooq Ali Channa, JJ

Messrs EVERLUCK ENTERPRISES Proprietorship Kamran Wahid Khan, Karachi and others

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division (FBR), Islamabad and others

Constitutional Petitions Nos.D-2986 and D-2988 of 2012, decided on 21st November, 2012.

Customs Act (IV of 1969)---

----Ss.157, 168, 171, 180, 181, 185-B(b) & 185-C---Notification S.R.O. No.761(I)/2012, dated 21-6-2012---Constitution of Pakistan, Art.199---Constitutional petition---Special and general law---Applicability---Scope---Mis-declaration---Confiscation of goods and registration of F.I.R.---Scope---Petitioners were importers who were charged for mis-declaration and their imported goods were confiscated with the option to redeem the goods under S.181 of Customs Act, 1969---Authorities also got F.I.R. registered against petitioners, which were pending trial---Validity---Such provisions of Criminal Procedure Code, 1898, so far they were not inconsistent with the provisions of Customs Act, 1969, would apply to the proceedings of Court of Special Judge (Customs)---Process of adjudication or prosecution under Customs Act, 1969, like in any other special statute, was required to be in consonance with the provisions of Customs Act, 1969, whereas provision of Criminal Procedure Code, 1898, or any other law, could be invoked only to the extent as provided in the statute itself---Specific provisions were available under Customs Act, 1969, for the purposes of confiscation, seizure, auction and release of confiscated goods by adjudicating authorities, the same being part of Special law would prevail upon provisions of general law i.e. Criminal Procedure Code, 1898---Findings recorded by authorities, whereby release of goods were made subject to production of "No Objection Certificate" from the Court of Special Judge (Customs), were erroneous in law and the same were set aside---Goods which did not fall within the category of prohibited articles or the same were not smuggled goods, could not be considered as case property---Such goods, in absence of any order passed by adjudicating authority should be dealt with by Special Judge (Customs) in accordance with law---Petition was disposed of accordingly.

Government of Pakistan through Additional Secretary (Customs), Ministry of Finance, Islamabad and another v. Mahmood Ahmed Qureshi and another 2002 SCMR 1527; Adam v. Collector of Customs, Karachi PLD 1969 SC 446; Khuda-e-Nazar v. The State 1987 PCr.LJ 9; The State v. Ghulam Jaffar and others PLD 1970 Pesh. 66; Muhammad Sarwar v. Federal Government of Pakistan and others 1988 PCr.LJ 213 and State through Director General, Pakistan Coast Guards, Turbat v. Sabro and another 1992 PCr.LJ 1795 ref.

Zain A. Jaoti and Sameer Ghazanfar for Petitioners.

S. Mohsin Imam for Respondents Nos. 3 and 4.

Dilawer Hussain, Standing Counsel.

Date of hearing: 18th September, 2012.

2013 P T D 486

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

Syed NUSRAT NASIR

Versus

FEDERATION OF PAKISTAN through Secretary and 3 others

Constitutional Petition No.D-2899 of 2010, decided on 28th November, 2012.

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

----Ss.9 & 10---Constitution of Pakistan, Art. 199---Constitutional petition---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complaint against maladministration---Aggrieved person---Scope---Petitioner while performing his duties as Additional Collector (Preventive) Customs made order for release of a vehicle, which was later rescinded when the case was reopened by another officer---Subsequently, the owner of the vehicle made complaint of maladministration against the other officer before the Federal Tax Ombudsman, who dismissed the same but along with the dismissal, also made recommendations for removal of the petitioner from service on grounds of maladministration---Contention of the petitioner was that the impugned recommendations were coram non judice and illegal as no complaint was filed against the petitioner in respect of his order-in-original---Validity---No complaint of maladministration against petitioner was filed by an aggrieved person nor any reference against the petitioner by the President, Senate or National Assembly was made, in the present case---Neither any motion of the Supreme Court nor of a High Court was made during the course of any proceedings and no proceedings of the Federal Tax Ombudsman's own motion against the petitioner were initiated by the Federal Tax Ombudsman in the present case as was evident from the impugned order---Federal Tax Ombudsman while making recommendations against the petitioner had failed to follow the procedure under S.10 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 as no notice was issued to the petitioner nor any opportunity was provided to him before making the impugned recommendations, which negated the principles of natural justice---Federal Tax Ombudsman had also failed to record any findings against the petitioner to the effect that as to how and what maladministration had been committed by him and in absence of such findings, recommendations made by the Federal Tax Ombudsman could be of no legal effect---Recommendations made by the Federal Tax Ombudsman against the petitioner were, thus, coram non judice, without jurisdiction and of no legal effect; and were accordingly set aside---High Court further declared that departmental proceedings initiated against the petitioner in compliance to the recommendations of the Federal Tax Ombudsman, were equally illegal---Constitutional petition was allowed, in circumstances.

(b) Public Functionaries---

----Authorities performing functions under any statute were required to conduct themselves strictly in accordance with law by remaining within the domain and jurisdiction as vested in them under the law.

(c) Interpretation of statutes---

----Every law was required to be administrated in such a manner that it may foster the purpose of such legislation and shall not, in any manner, frustrate the same.

Muhammad Kaukab Sabahuddin for Petitioner.

Asaf Vardag and Dilawar Hussain, Standing Counsel for Respondents.

Date of hearing: 28th November, 2012.

2013 P T D 508

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

COMMISSIONER INLAND REVENUE, KARACHI

Versus

Messrs E.N.I. PAKISTAN (M) LTD., KARACHI

I.T.R.A. No.304 of 2010, decided on 20th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221 & 133---High Court Reference---Rectification of mistake---Scope---Department moved application for rectification on an error, which was declined concurrently---Validity---Mistake should be apparent from record, floating on surface and may not require any investigation or other evidence---Mistake which was sought to be rectified, must be so obvious and apparent from record that it may immediately strike on the face of it and may not be something which was to be established by a long drawn process of reasoning on issues on which there could be conceivably two views or opinions---Scope of rectification was limited to the extent of rectification of an "error apparent from record" and hence S. 221 of the income Tax Ordinance, 2001 could not be invoked as an alternate or substitute for appeal, revision or review---Issue, in the present case, did not fall within the category of "mistake apparent on record"---Reference application was dismissed, in circumstances.

Messrs National Foods v. CIT 1992 SCMR 687 = 1992 PTD 570 rel.

Muhammad Altaf Mun for Applicant.

Nemo for Respondent.

Date of hearing: 20th November, 2012.

2013 P T D 556

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

COMMISSIONER INLAND REVENUE, ZONE-III, KARACHI

Versus

Messrs ADAM SUGAR MILLS LIMITED, KARACHI

Special S.T.R.A. No.71 of 2012, decided on 17th January, 2013.

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

----S. 47---Income Tax Ordinance (XLIX of 2001), S. 130---Constitution of Pakistan, Art. 203 & 201---Supervisory jurisdiction of High Court over Federal Tribunals operating within jurisdiction of High Court---Reference against order of Appellate Tribunal, Inland Revenue---Territorial jurisdiction of High Court---Proceedings against taxpayer were initiated in the Province of Punjab and appeal of taxpayer against original order was accepted by the Inland Revenue Tribunal in Punjab---Department filed reference against order of Inland Revenue Tribunal at Sindh High Court---Contention of Department inter alia, was, that due to certain legislative and administrative changes in the year 2009, the taxpayer came under jurisdiction of the Large Taxpayers Unit situated in the Province of Sindh, hence the present reference was filed at the Sindh High Court---Validity---Tribunal whose order was impugned, was constituted under S. 130 of the Income Tax Act, 2001 and had jurisdiction to deal with matters relating to income tax, sales tax and federal excise---Each High Court was at the apex of the judicial hierarchy in its Province and subject always to a decision of the Supreme Court, a decision of a High Court, to the extent that it decides a question of law or is based upon or enunciates a principle of law was binding on all courts subordinate do it---Each High Court also had the power to supervise and control all courts subordinate to it---Customs, Excise and Sales Tax Tribunals were courts within the meaning of Art. 203 of the Constitution, hence fell within the supervisory jurisdiction and control of the High Court---Federal Tribunal was bound by its Constitutional mandate to follow and apply the relevant decisions of the High Court within whose jurisdiction it sits---Reference against a decision of a Tribunal could only be filed in the High Court which exercises jurisdiction over the Bench of the Tribunal that made the impugned order---Reference, in the present case, could only be filed before the Lahore High Court in Punjab and not in the Sindh High Court as it did not have jurisdiction to entertain the same---Reference, being not maintainable, was dismissed in circumstances.

Philips Electrical Industries of Pakistan Ltd. v. Pakistan and others 2000 YLR 2724; State of Andhra Pradesh v. Commercial Tax Officer and another 169 ITR 564; Commissioner of Gift Tax v. J.K. Jain 230 ITR 839; Taylor Instrument Co. (India) Ltd. v. Commissioner of Income Tax 232 ITR 771 and India Tube Co. Ltd. v. Commissioner of Income Tax and others 203 ITR 54 rel.

Asghar Hussain v. Election Commissioner of Pakistan PLD 1968 SC 387; Al Iblagh Ltd. v. The Copyright Board 1985 SCMR 758 and Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue PLD 1997 SC 334 distinguished.

(b) Constitution of Pakistan---

----Arts. 203 & 201---Supervisory jurisdiction of High Court over subordinate courts---Federal Tribunals---Each High Court was at the apex of the judicial hierarchy in its Province and subject always to decisions of the Supreme Court, a decision of a High Court, "to extent that it decides a question of law or is based upon or enunciates a principle of law" was binding on all courts subordinate do it---Each High Court had the power to supervise and control all courts subordinate to it---Federal Tribunal was bound by its Constitutional mandate to follow and apply the relevant decisions of the High Court within whose jurisdiction it sits---Reference against a decision of a Tribunal could only be filed in the High Court which exercises jurisdiction over the Bench of the Tribunal that made the impugned order.

S. Mohsin Imam for Applicant.

Mian Abdul Ghaffar for Respondent.

Date of hearing: 17th January, 2013.

2013 P T D 628

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

MUHAMMAD ALI

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and another

Constitutional Petition No.D-3809 of 2012, decided on 10th January, 2013.

Customs Act (IV of 1969)---

-----Ss.186, 80, 32 & 25---Constitution of Pakistan, Art. 199---Constitutional petition---Import of goods---Detention of goods under S.186 of the Customs Act, 1969---Scope---Petitioner paid the duty and taxes assessed by the Customs Authorities, and the consignment of the petitioner was made "out of charge", however, the consignment was not released by the Authorities---Contention of the Authorities was that an inquiry was to be conducted on the consignment of the importer (petitioner) on basis of mis-declarations made in previous consignments of the petitioner and that the goods had been detained under S. 186 of the Customs Act, 1969---Validity---Once goods had been examined and assessed to duty and taxes and reassessed in terms of S.80 of the Customs Act, 1969, and the same were paid, and clearance of consignment had been made and goods were "out of charge"; Customs Authorities had no jurisdiction to refuse release of such goods nor the same could be detained on the basis of alleged misdeclaration of some previous consignment by the importer---Customs Authorities could reassess only if duty and taxes were not levied correctly by invoking the provisions of S.32 of the Customs Act, 1969 provided the same were attracted to facts and circumstances of the case---Neither any inquiry or investigation was pending nor any proceedings for misdeclaration had been initiated against the petitioners---No notice for detention, seizure or confiscation was issued---Detention of petitioner's consignment, was therefore, illegal and without jurisdiction---High Court directed the release of the consignment forthwith---Constitutional petition was allowed, in circumstances.

Messrs Wall Master v. Collector PTD 2004 3018; Messrs Sunny Traders v. Federation of Pakistan 2009 PTD 281; Messrs Safe Way v. Deputy Collector Customs 2009 PTD 201; Shahzad Ahmed Corporation v. Federation of Pakistan 2005 PTD 23; Messrs Zeb Traders v. Federation of Pakistan 2004 PTD 369 and Sus Motors (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 235 rel.

Shahzad Ahmed Corporation v. Federation of Pakistan 2005 PTD 23 ref.

Ms. Ismat Mehdi for Petitioner.

Kashif Nazeer, Jawaid Farooqi, D.A.-G. and Ilyas Ehsan, Custom Officer for Respondents.

Date of hearing: 16th November, 2012.

2013 P T D 649

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Farooq Ali Channa, JJ

COLLECTOR OF CUSTOMS

Versus

NAZEER AHMED

Special Customs Reference Application No.160 and C.M.As. Nos. 1794, 1297 of 2012, decided on 17th October, 2012.

Customs Act (IV of 1969)---

----Ss. 193(A)(5) & 196---High Court Reference---Scope---Appeal filed by Department was returned by Appellate Tribunal on the ground that same was barred by time under S. 193 of the Customs Act, 1969---Contention of the Department was that said finding of Appellate Tribunal was wrong since Collector's (appeals) order-in-appeal was not served upon the Department in time---Validity---Perusal of record revealed that no plea regarding the late communication/service of order of Collector(appeals) was raised before the Appellate Tribunal nor any material was produced to condone the delay---No application for condonation of delay was filed and said plea had been taken for the first time which lead to a factual controversy regarding service of order or otherwise, and the same could not be allowed to be raised since scope of a Reference application under S. 196 of the Customs Act, 1969 was limited to the extent of deciding questions of law which arose form the orders of the Appellate Tribunal---Disputed questions of facts could not be interfered with by the High Court in its referral jurisdiction whereas any finding recorded by Tribunal on facts could not be interfered with by the High Court unless the same was perverse and contrary to the facts on record---Reference was dismissed.

Ms. Dil Khurram Shaheen for Appellant.

2013 P T D 658

[Sindh High Court]

Before Mushir Alam, C.J. and Muhammad Shafi Siddiqui, J

LANDIRENZO PAKISTAN (PVT.) LTD. Through Chief Executive Officer, Karachi and 3 others

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad and 6 others

Constitutional Petition No.D-3000 of 2012, decided on 12th December, 2012.

(a) Constitution of Pakistan---

----Art. 199---Constitutional petition-Policy decisions of government--Interference in such decisions by High Court in constitutional jurisdiction---Scope.

In matter of policy decisions, the Government is the best judge and it is not for the High Court to sit on the policy matters, unless those appear to be violative of constitutional guarantees, arbitrary, mala fide or on account of colourable exercise of power.

(b) Imports and Exports (Control) Act (XXXIX of 1950)---

----Ss.2 & 3(1)---Import Policy Order, 2009, Paras 5(a)(viii)(xxi) & 6---Rules of Business, 1973, Rr.2(xviii), 24 & 55---General Clauses Act (X of 1897), S.21---Customs Act (IV of 1969), S.16---S.R.O. No.84(l). 2012 dated 1-2-2012---Constitution of Pakistan, Art.199---Constitutional petition---Imposition of ban on import of CNG kits, equipments and cylinders through amending S.R.O. 84(1)/2012, dated 1-2-2012---Validity-Neither granting of licences to petitioners to import such goods would create any vested right nor impugned S.R.O. had curtailed any of their vested rights, nor such licences would guarantee them to continue to import such goods uninterruptedly---Government had power to impose conditions and give exception either generally or specially and also to alter, modify or make addition thereto---Notification prohibiting import and export of goods issued under S.3(1) of Imports and Exports (Control) Act, 1950 would be deemed to be a notification under S.16 and all provisions of Customs Act, 1969---Impugned S.R.O. was not ultra vires---High Court dismissed constitutional petition in circumstances.

Gatron (Industries) Limited v. Government of Pakistan 1999 SCMR 1072; Theresa Henry v. Calixtus Henry 2012 SCMR 1074; Alleged Corruption in Rental Power Plants and others In the matter of 2012 SCMR 773; Collector of Customs v. Flying Kraft Paper Mills 1999 SCMR 709; Human Rights cases In the matter of PLD 2010 SC 759; Babar Hussain Shah v. Mujeeb Ahmed Khan 2012 SCMR 1235; Ibrahim Fibres Ltd. v. Collector of Customs 2009 PTD 1902; Government of Pakistan v. Village Development Organization 2005 SCMR 492; Mohsin Raza v. Chairman FBR PTCL 2009 PTD 1507; Chief Secretary, Punjab, Lahore v. Naseer Ahmad Khan 2010 SCMR 431; All Pakistan Newspaper Society v. Federation of Pakistan PLD 2012 Sindh 129; Muhammad Afsar V. Malik Muhammad Farooq 2012 SCMR 274; Muhammad Zargham Eshaq Khan v. University of Engineering PLD 1988 Lah. 191; The Automobile Transport Rajasthan v. The State of Rajasthan AIR 1962 Rajistan 24; Abdul Majeed Zafar v. Governor of Punjab 2007 SCMR 330; Nazir Ahmad Panhwar v. Government of Sindh 2005 SCMR 1814; Mir Dost Muhammad v. Government of Balochistan PLD 1980 Quetta 1; Pollution of Environmental caused by smoke emitting vehicles, traffic muddle 1996 SCMR 543; Muzaffar Khan v. Evacuee Trust Property 2002 CLC 1819; Imdad Hussain v. Province of Sindh PLD 2007 Kar. 116; Everlast Enterprises Ltd. v.' Government of Pakistan PLD 1971 Lah. 999; Zamir Ahmed Khan v. Government of Pakistan 1978 SCMR 327 and Noor Hussain v. The State PLD 1966 SC 88 ref.

Ramdhandas and another v. State of Punjab AIR 9161 SC 1559 rel.

(c) Constitution of Pakistan---

----Art.18---Issuance of licence by government to carry on business/ trade/profession---Validity---Such licence would not confer a vested right on licensee---Principles. Issuance of licence under the law is only privilege and does not confer a vested right and is often required as condition precedent to the right to carry on some business. The State may by law directed that certain trades or professions will not be carried on except under a licence and it may by licence determine the place where and the time when certain business are to be conducted.

Ramdhandas and another v. State of Punjab AIR 1961 SC 1559 rel.

(d) Constitution of Pakistan---

----Arts. 18 & 25---Legislation to regulate trade/business/profession of specialized class of persons---Estoppel against legislation---Scope.

The legislature in its wisdom is competent to legislate general law and special law for any specialized class of persons. There is estoppel against the legislature provided it passed such test on the touchstone of the fundamental rights guaranteed under the constitution.

There is no estoppel against the legislature and it is within the powers, jurisdiction of the Government and legislative authorities to frame the policy and to regulate affairs in accordance with law. The right of freedom of trade, business or profession guaranteed by Article 18 of the Constitution is not absolute as it can be subject to reasonable restrictions and regulations, as may be prescribed by law. Such right to trade, business and profession guaranteed under the Constitution is not unguarded. Such restrictions can only be held unconstitutional if the authority competent to regulate its affairs acts arbitrarily, discriminately or acts contrary to the policy. This principle of regulation of trade has been given judicious approval.

Shahzad Riaz v. Federation of Pakistan 2006 YLR 229; Pakistan Newspaper Society v. Federation of Pakistan PLD 2012 Sindh 129; Pakcom Ltd. v. Federation of Pakistan PLD 2011 SC 44 and Government of Balochistan v. Azizullah Memon PLD 1993 SC 3.11 rel.

(e) Legislation---

----Powers to legislate and promulgate law not being a trade, thus, interested parties could not be heard.

Aziz A. Shaikh for Petitioners.

Jawed Farooqui, D.A.-G. for Respondent No.l.

Asim Iqbal and Farmanullah for Respondent No.3.

Date of hearing: 22nd November, 2012.

2013 P T D 682

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

Messrs SARAH CONSTRUCTION CO. through Partner, Karachi

Versus

TAXATION OFFICER-5, AUDIT-2, KARACHI and 2 others

Income Tax Reference Application No.421 of 2010 out of I.T.A. No.363/KB of 2008 decided on 20th December, 2012.

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

----Ss.121 & 174---Best judgment assessment without issuing notice under S.121 of Income Tax Ordinance, 2001---Powers of Taxation Officer---Scope---Taxation Officer, in case of failure of taxpayer to provide required information or evidence, could pass such judgment on basis of available information or material, but could not make arbitrary and fanciful estimate of his income---Principles.

There seems to be no embargo upon a Taxation Officer to make best judgment assessment under S.121 in case of a person who fails to comply with the notice issued under section 177 by the Taxation Officer.

While passing best judgment assessment in the case of a taxpayer, who fails to comply with the legal requirements or the notices issued by the Taxation Officer seeking certain explanation or calling for the documents/evidence in support of the return of income filed by the taxpayer, a Taxation Officer is required to pass best judgment assessment on the basis of available information or material, whereas he is not permitted under law to make arbitrary and fanciful estimate of the income of a taxpayer.

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

----S.133---Reference application---Jurisdiction of High Court---Scope---High Court could examine only question of law arising from order passed by Appellate Tribunal---Principles.

Emad-ul-Hasan for Applicant.

Amjad Javaid Hashmi for Respondents.

Date of hearing: 11th December, 2012.

2013 P T D 731

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

MUHAMAMD RAFIQ and another

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

Special Customs Reference Application No.57 of 2010, decided on 20th December, 2012.

Customs Act (IV of 1969)---

----Ss.79(1), 155-E & 196---Import Policy Order [2007-2008], Appendix "A" Part-II, Sr.II---Notification S.R.O. No.407(1) dated 3-6-2009---Reference to High Court---Unique User Identifier---Show cause notice, non-receipt of---Importer assailed orders passed by authorities on the plea that no show cause notice was issued to him---Validity---Every information including show cause notice or adjudication orders could be transmitted through customs computerized system using a Unique User Identifier issued to a registered user by customs authorities---Transmission of such information, in absence of proof to the contrary was sufficient evidence that registered user, to whom Unique User Identifier was issued, had transmitted such information---Importer attempted to raise false plea of non-service of show cause notice by ignoring provision of S. 155-E of Customs Act, 1969, whereas no plausible explanation had been offered, which could justify mis-declaration on the G.D.---Importer, besides evading duty and taxes, made an attempt import explosives/fire crackers, which were banned under serial No.11, Part-II, appendix "A" of Import Policy Order 2007-08---Option to get such goods redeemed was not available for import in terms of notification No. S.R.O. No.407(I) dated 3-6-2009, which had rightly been declined by authorities---Order passed by Customs Appellate Tribunal did not suffer from any factual or legal error---Reference was disposed of accordingly.

Yasir Enterprises v. Model Customs Collectorate 2009 PTD 1880 ref.

Shakeel Ahmed for Applicants.

Ghulam haider Shaikh for Respondent No.3.

Date of hearing: 20th November, 2012.

2013 P T D 765

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

MUHAMMAD GUL

Versus

MEMBER JUDICIAL, CUSTOMS APPELLANT TRIBUNAL, KARACHI and another

Special Customs Reference Application No.58 of 2010, decided on 29th January, 2012.

Customs Act (IV of 1969)---

----Ss.159(I), 168, 187 & 196---Reference to High Court---Vehicle registered with Motor Vehicle Registration Authority before 14 years---Seizure of such vehicle alleged to be smuggled one on the ground that out of the documents produced by its owner (i.e. original Registration Book, copy of Bill of Entry, copies of documents regarding clearance of such vehicle from Port and receipt showing payment of duty and taxes along with Bill of Lading), copy of Bill of Entry did not pertain to said vehicle---Order-in-original passed by Adjudication Authority upheld by Appellate Authority and the Tribunal---Validity Registration Authority had duly verified genuineness of registration and issuance of registration book in respect of such vehicle to its owner---Authority itself had failed to ascertain as to whether import documents produced by owner were fake or irrelevant---Authority had not verified as to whether registration of such vehicle by Registration Authority was in accordance with law or not---Tribunal in earlier round of litigation had opined on basis of same facts and record that owner had successfully discharged burden of proof by producing relevant import documents, but Authority had failed to prove such vehicle to be smuggled one---Tribunal while passing impugned order had discarded such documents produced by owner and based its findings upon surmises and conjectures---Authority had failed to discharge burden of proof, which shifted thereon in terms of S.187, Customs Act, 1969 on production of such documents by owner---High Court accepted Reference application in circumstances.

Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 rel.

Dilharam Shaheen for Applicant.

Ghulam Hyder Shaikh for Respondent.

Date of hearing: 13th December, 2012.

2013 P T D 799

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

ROUSCH (PAKISTAN) POWER LTD.

Versus

DEPUTY COLLECTOR REFUND GROUP-III

Special Sales Tax Reference Application No.381 of 2007, decided on 3rd January, 2013.

Sales Tax Act (VII of 1990)---

----Ss.2(33)(35)(41), 4 & 13---S.R.O. No.124(I)/2000, dated 15-3-2000---Electricity produced by applicant and supplied to residential colony of its employees---Chargeability of tax on such supply---Scope---Definition of term "supply" under S. 2(33) of Sales Tax Act, 1990 would include sale or other transfer of right to dispose of goods as owner by putting to private, business or non-business use of goods produced or manufactured in course of taxable activity for purposes other than those making a taxable supply---Term of taxable supply under S. 2(41) of Sales Tax Act, 1990 would mean a supply of taxable goods by an importer, manufacturer, wholesaler, distributor or retailer other than a supply of goods being exempt under S. 13 thereof---Supply of goods chargeable to tax @ zero per cent under S. 4 of Sales Tax Act, 1990 would constitute taxable supply---Term "taxable supply" under S. 2(35) of the Act would mean any economic activity carried on by a person whether or not for profit---Sales tax being in nature of general tax, thus, its levy could not be excluded from purview of chargeability without showing same to be exempt under the Act---Such supply was not exempt under S.13 of Act, 1990---S.R.O.124(I)/2000 dated 15-3-2000 neither excluded chargeability of sales tax on such taxable supply nor provided for any exemption from its levy---Applicant being engaged in taxable activity had made taxable supplies by providing electricity to its employees, thus, same would be chargeable to sales tax in absence of exemption under S.13 of Sales Tax Act, 1990.

Qazi Anwar Kamal for Applicant.

Muhammad Altaf Mun for Respondent.

Date of hearing: 5th December, 2012.

2013 P T D 813

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

Messrs SARWAR INTERNATIONAL through Proprietor and others

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, MCC PREVENTIVE, AFU JIAP Karachi and others

Special Customs Reference Applications Nos. No.466 and 467 of 2011, decided on 20th December, 2012.

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

----S.196---Question of law raised before Appellate Tribunal, but not decided---Jurisdiction of High Court---Scope---High Court could take such question to be arising from order of Tribunal particularly if same related to matter in controversy giving rise to a question of law---Principles.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax South Zone, Karachi 1982 SCMR 489 rel.

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

----S.32---Misdeclaration of goods, charge of---Clearance of goods in year 2003 under PCT Heading 8471.8030 attracting 0% customs duty and sales tax---Issuance of show-cause notice in year, 2008 alleging against importer wilful attempt to evade leviable duty and taxes on basis of subsequent scrutiny of bill of entry revealing correct classification of goods under PCT heading 8525.2090---Validity---Due to absence of allegation of fraud, collusion or deliberate misdeclaration in such notice, provisions of S.32(3) of Customs Act, 1969 could be invoked and not subsections (1) and (2) thereof---Such notice had been issued after expiry of about four years, thus, provision of S.32(3) of Customs Act, 1969 could not be invoked beyond period of three years---Such notice for being time barred was, held, to be void.

Union Sport Playing Cards Company v. Collector of Customs and another 2002 MLD 130 and Collector of Customs (Preventive), Karachi v. Pakistan State Oil Karachi 2011 SCMR 1279 ref.

Zaheer-ul-Hassan Minhas for Applicant.

Ms. Dil Khurram Shaheen for Respondents.

Dilawer Hussain, Standing Counsel.

Date of hearing: 30th November, 2012.

2013 P T D 851

[Sindh High Court]

Before Munib Akhtar, J

KARACHI ELECTRIC SUPPLY CORPORATION LTD. through Director Taxation

Versus

FEDERAL BOARD OF REVENUE through Chairman and 3 others

Suit No.1322 and C.M.As. Nos. 10305, 11608 and 11609 of 2012, decided on 30th January, 2013.

(a) Interpretation of statutes---

----Amendment in law---Presumption---When law is amended, it is assumed that a change is intended to be brought about.

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

----Ss.161 & 235---Specific Relief Act (I of 1877), Ss.42 & 54---Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2---Suit for declaration and injunction---Interim injunction, grant of---Advance income tax, collection of---Concurrent jurisdiction---Second notification---Scope---Plaintiff company was aggrieved of notices issued by defendants for recovery of advance income tax collected by it---Validity---Federal Board of Revenue had no power or jurisdiction to issue second notification, whereby it had purported to confer concurrent jurisdiction in terms of S. 161 of Income Tax Ordinance, 2001, on Commissioner of another zone, in case of advance income tax collected under S. 235 of Income Tax Ordinance, 2001---Such jurisdiction vested only as originally conferred in terms of first notification i.e. alone in the Commissioner zone concerned---Plaintiff had made out a case for interim relief, as equities were in its favour and there was a prima facie case---To allow Deputy Commissioner of another zone to proceed on the basis of demand notices would be to encourage continuance of proceedings in a manner that was contrary to mandatory provisions of Income Tax Ordinance, 2001, and would be detrimental to rule of law and such act of defendants was prima facie without jurisdiction---Balance of convenience was in favour of plaintiff company and it might suffer irreparable loss and injury if on the one hand it continued to be deprived of huge sums by way of refund due to it and taken from it by State by way of tax revenue and on the other was required to hand over to the State amount that would comprise of tax revenue---Demand notices issued by Deputy Commissioner of another zone were suspended and Commissioner of that other zone was restrained from taking any action in terms of S. 161 of Income Tax Ordinance, 2001, in respect of advance tax collected by plaintiff under S. 235 of Income Tax Ordinance, 2001---Application was allowed accordingly.

ICI Pakistan Ltd. v. Federation of Pakistan and others 2006 PTD 778; Shagufta Begum v. Income Tax Officer PLD 1989 SC 360; H.M. Abdullah v. Income Tax Officer and others 1993 SCMR 1195; Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090; Abbasia Cooperative Bank and another v. Hakeem Rafiz Muhammad Ghaus and others PLD 1997 SC 3; Tahir A. Khan v. Central Board of Revenue and others 2003 YLR 196 and Hysons Sugar Mills Ltd. v. Market Committee Khanpur 1989 CLC 2000 ref.

(c) Constitution of Pakistan---

----Art.199---Constitutional petition---Adequate and alternate remedy---Scope---Existence of adequate alternate remedy does not bar jurisdiction of High Court under Art.199 of the Constitution but simply regulates.

Abid S. Zuberi and M. Umer Lakhani for Plaintiff.

Syed Shafqat Ali Shah Masoomi for Defendant No.3.

Habibullah Khan, Commissioner Inland Revenue, Zone-IV, RTO-II and Badar Ayub, Deputy Commissioner, Inland Revenue, Unit 2, Zone IV, RTO-II, Karachi.

Date of hearing: 21st January, 2013.

2013 P T D 969

[Sindh High Court]

Before Faisal Arab, Sajjad Ali Shah and Aqeel Ahmed Abbasi, JJ

Messrs SHAHBAZ GARMENTS (PVT.) LTD. and others

Versus

PAKISTAN through Secretary Ministry of Finance, Revenue Division, Islamabad and others

Constitutional Petitions Nos.D-2753 of 2009, D-3482, D-1084, D-115, D-1483, D-1619, D-230, D-2700, D-2876, D-2877, D-2878, D-344, D-345, D-346, D-347, D-348, D-3483, D-3484, D-3488, D-3489, D-439, D-3490, D-3491, D-3492, D-3493, D-3494, D-356, D-357, D-358, D-359, D-360, D-367, D-3912, D-3913, D-3914, D-4119, D-440, D-495, D-589, D-590, D-605, D-679, D-680, D-699, D-856, D-857, D-4120, D-4121 of 2011, D-2754, D-2755, D-2756 of 2009, D-1394, D-2688, D-3143, D-3521, D-3618, D-452 and D-6 of 2010, decided on 1st March, 2013.

(a) Words and phrases---

----"Fee"---Defined and explained.

Chambers 21st Century Dictionary (Revised Edition); Black's Law Dictionary (Sixth Edition); Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13 Edition KJ Aiyar; Legal Terms and Phrases 2006 Edition by M. Ilyas Khan and Supreme Court on Words and Phrases by Justice M. L. Singhal rel.

(b) Words and phrases---

----"Tax"---Defined and explained.

Black's Law Dictionary (Sixth Edition); Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13 Edition KJ Aiyar; Legal Terms and Phrases 2006 Edition by M. Ilyas Khan; Supreme Court on Words and Phrases by Justice M. L. Singhal and Chambers 21st Century Dictionary (Revised Edition) ref.

(c) Words and phrases---

----"Tax and Fee"---Defined and distinguished.

Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13 Edition KJ Aiyar; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Burmah Shell Ltd. v. Federation of Pakistan 1998 PTD 1804; Pakistan Flour Mills Association v. Government of Sindh 2003 SCMR 162; Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; The Elel Hotels and Investments Ltd., and another v. Union of India AIR 1990 SC 1664; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329 and Syed Nasir Ali v. Pakistan 2010 PTD 1924 ref.

(d) Constitution of Pakistan---

----Arts. 73, 199 & 260(1)---Taxation by Government through Money Bill (Finance Act)---Judicial review of Money Bill by High Court---Scope---Legislative competence of Government to raise funds by imposing various taxes must be jealously guarded instead of making an attempt to declare a taxing statute ultra vires---Principles.

Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Burmah Shell Ltd. v. Federation of Pakistan 1998 PTD 1804; Pakistan Flour Mills Association v. Government of Sindh 2003 SCMR 162; Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; The Elel Hotels and Investments Ltd., and another v. Union of India AIR 1990 SC 1664; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329; Syed Nasir Ali v. Pakistan 2010 PTD 1924 and Morey v. Doud (1957) U.S. 457 rel.

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

----Ss.2(c), 3 to 6 & Sched.-A, Ch.-1---Constitution of Pakistan, Arts.73, 199 & 260(1)---Constitutional petition---Amendments introduced in Workers' Welfare Fund Ordinance, 1971 through Finance Acts (Money Bills) of 2006 and 2008---Petitioner's plea was that Workers' Welfare Fund being a fee and not a tax, thus, such amendments could not be introduced through Finance Act (Money Bill)---Validity---Definition of word "tax" would be given widest meanings and any levy having attributes of a tax would fall in its ambit irrespective of name and nomenclature or ultimate use of fund generated through particular statute---Word "taxation" as defined in Art. 260(1) of the Constitution would include all types of duties---Levy under Workers' Welfare Fund Ordinance, 1971 could be said to be "duty" falling within meaning and scope of such word "taxation"---Such fund being a charge on income of an industrial establishment would be utilized solely for benefit of workers for providing them housing facilities etc., and not for its payer (industrial establishment)---Element of quid pro quo being a pre-requisite in case of fee was totally missing in case of such Fund---Legislature had not used word "fee" for such fund in the Ordinance, nor was same charged by Government for providing any services to its payer nor would be utilized for benefit of its payer, thus, same had all attributes and characteristics of tax imposed in nomenclature of such fund upon total income of an industrial establishment to be assessed and collected by concerned Taxation Officer---High Court declared such amendments to be intra vires of the Constitution---Principles.

Mutual Fund Association of Pakistan v. Federation of Pakistan 2010 PLC 306; Multiline Associates v. Ardeshir Cowasjee and others 1995 SCMR 362; Ardeshir Cowasjee and 10 others v. Karachi Building Control Authority (KMC), Karachi 1999 SCMR 2883; C.I.T v. Kamran Model Factory 2002 PTD 14; East Pakistan Chrome Tannery (P.) Ltd. v. Federation of Pakistan 2011 PTD 2643; M. Ismail and Co. v. Chief Collector PLD 1966 SC 388; Pakistan Agricultural Storage and Service Corporation Ltd. v. Province of Punjab and another PLD 1989 Lah. 367; Collector of Customs v. Sheikh Spinning Mills 1999 SCMR 1402; Biafo Industries v. Federation of Pakistan 2000 CLC 170; Messrs Lever Brothers (Pakistan) Ltd., Karachi v. Market Committee, Rahimyar Khan PLD 1980 Baghdadul Jadid 23; Abdul Majid v. Province of East Pakistan PLD 1960 Dacca 502; Dr. Abdul Jamil v. Malik Nazar Mohyuddin and others PLD 1988 Pesh. 15; Sindh High Court Bar Association v. Federation of Pakistan PLD 2009 SC 789; Mir Muhammad Idris v. Federation of Pakistan PLD 2011 SC 213; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; East Pakistan Chrome Tannery (P.) Ltd. v. Federation of Pakistan 2011 PTD 2643; C.A. 1891 Unwin v. Hanson 115; Kawther Grain (Pvt.) Ltd. v. DCIT Gujranwala 1999 PTD 4028; Collector of Central Excise, Bombay-1 and another v. Messrs Parle Exports (P) Ltd. AIR 1989 SC 644; Messrs Hindustan Aluminum Corporation Ltd. v. The State of U.P and another AIR 1981 SC 1649; Messrs Indian Cable Company Ltd. Calcutta v. Collector of Central AIR 1995 SC 64 ref.

Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Burmah Shell Ltd. v. Federation of Pakistan 1998 PTD 1804; Pakistan Flour Mills Funds Association v. Government of Sindh 2003 SCMR 162; Messrs Mutual Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; The Elel Hotels and Investments Ltd., and another v. Union of India AIR 1990 SC 1664; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329; Syed Nasir Ali v. Pakistan 2010 PTD 1924; Morey v. Doud (1957) U.S. 457; East Pakistan Chrome Tanney (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 2643 and Messrs Mutual Funds Association of Pakistan v. Federation of Pakistan 2010 PTD 306 rel.

(f) Interpretation of statutes---

----Preamble of a statute---Validity---Preamble could be used as an aid to ascertain purpose of statute, but could not determine its scope or validity.

(g) Interpretation of statutes---

----Taxing statute, charging section in---Object stated.

In taxing statute, the provision relating to chargeability of the levy determines the jurisdiction and scope of such levy. The charging provision not only defines the mandate of the levy, but also the subject from whom such levy is to be charged and collected.

Dr. Muhammad Farogh Naseem, Khalid Javed Khan, Rashid Anwar, M. Anas Makhdoom, Anwar Kashif Mumtaz, Naveed A. Andrabi, Khalid Mehmood Siddiqui, Ghulam Murtaza, Lubna Pervez, Abid Shahban, Junaid Farooqi, Muhammad Rafi Kamboh, Kazim Hasan, Abdul Rahim Lakhani, Aminuddin Ansari, Ali Mumtaz Shaikh, Abdul Hameed Kazi and Muhammad Adnan for Petitioners.

Amjad Javed Hashmi, Dr. Tariq Masood, Additional Commissioner (Legal), M. Asif Mangi, Standing Counsel, M. Sarwar Khan, Addl. A.G., Chaman Lal, S. Mohsin Imam and S. Riazuddin and Muhammad Saleem Mangrio for Respondents.

Date of hearing: 10th December, 2013.

2013 P T D 1012

[Sindh High Court]

Before Faisal Arab and Nadeem Akhtar, JJ

Messrs SHELL (PAKISTAN) LTD. through Associate Legal Counsel

Versus

PAKISTAN through Secretary Revenue Division and 2 others

Constitutional Petitions Nos.D-3048, D-2061, D-2180, D-2643, D-2648, D-3496, D-3624, D-3625, D-1866, D-1807, D-1867, D-1806, D-1924, D-1946, D-1947, D-2001, D-2002 and D-2003 of 2010, D-11, D-12, D-229, D-3582, D-3953, D-3954 and D-2705 of 2011 and D-231 and D-1498 of 2012, decided on 20th March, 2013.

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

---Ss.209, 210, 120, 122 211 & 2(3)---Constitution of Pakistan, Art.199--Constitutional petition---Amendment in assessment---Delegation of powers and functions of Commissioner Inland Revenue to Additional Commissioner Inland Revenue---Scope and object---Competence of Additional Commissioners to issue notices to taxpayers under S. 122 of the Income Tax Ordinance, 2001 for amendment in assessments---Petitioner (taxpayers) impugned notices for amendment in their assessments, on the ground that same were issued by Additional Commissioners, Inland Revenue who were not competent to make amendment in assessments of the petitioners---Contention of the petitioners (taxpayers) was that once a tax return was filed by a taxpayer under S. 114 of the Income Tax Ordinance, 2001 and said return had been deemed to be an assessment order of the Commissioner, Inland Revenue under provisions of S. 120(1) of the Ordinance, thereafter an officer subordinate to the Commissioner Inland Revenue, such as Additional Commissioners, Inland Revenue, could not revise the same under S. 122 of the Income Tax Ordinance, 2001---Validity---To effectively and efficiently deal with the practical aspects of scrutinizing tax returns, powers and functions of the Commissioner Inland Revenue could be delegated to an officer subordinate to him and said object was achieved under the provisions of Ss.209, 210 read with Ss. 2(12) and 211 of the Ordinance---Delegation of powers of the Commissioner Inland Revenue were invoked out of sheer need of the Income Tax Department as scrutiny of tax returns which was an onerous and time consuming task, needed a lot of man-hours and application of mind which could not be completed within reasonable time if left only to be done by the Commissioner Inland Revenue, therefore, petitioners' contention that the delegation of powers by the Commissioner Inland Revenue to Additional Commissioners, amounted to abdication of his powers, had no force---Deeming provisions of S. 120(1) of the Ordinance whereby filing of return of income was taken as assessment income made by the Commissioner Inland Revenue were only for the reason that each and every return need not be physically assessed by the Commissioner by application of mind, therefore, said provisions were provisions of convenience---Contention of the petitioners, if accepted, would render the delegation of powers and functions under Ss. 209 and 210 of the Ordinance as absolutely redundant, and redundancy could not be attributed to any provision of a statute unless it did not fit in the whole scheme of such a statute---Such delegation did not prejudice to any rights of a taxpayer that had been preserved under other provisions of the Ordinance, or under other principles of law---High Court observed that no legal infirmity existed in any provision of the Ordinance whereby powers and functions of the Commissioner Inland Revenue were delegated to Additional Commissioners Inland Revenue and that impugned notices were validity issued by Additional Commissioners Inland Revenue under S.122 of the Ordinance---Constitutional petitions were therefore, dismissed, in circumstances.

1991 SCMR 2223; PLD 1988 SC 53; 2011 PTD 2128; PLD 1992 SC 485; 1993 SCMR 1232; 1990 MLD 1912; PLD 1962 Lah. 887; PLD 1965 SC 459; 1987 CLC 1109; 2005 CLC 922; 2002 PTD 7; 2006 SCMR 1410; PLD 2012 SC 1; PLD 1966 (sic) 287; PLD 1964 Lah. 539; PLD 1985 Kar. 572; PLD 2001 SC 1; PLD 2010 SC 265; PLD 1961 SC 119; 2001 SCMR 103; 1995 PTD 741; 2001 PTD 2484; PLD 1997 SC 582; 2003 MLD 777; PLD 2009 Lah. 268; 2010 PTD 1506; PLD 1970 SC 75; PLD 1983 SC 53; PLD 1986 SC 88, 2001 PTD 1467; 1984 PTD 137; PLD 1992 SC 549; 1991 PTD 359; 1993 SCMR 96; 2009 CLD 257; 178 ITR 31; 254 ITR 337; 194 ITR 539; 189 ITR 741; 2012 PTD 130; 1994 PTD (Trib.) 535; 1999 SCMR 745; AIR 1948 Allahabad 129; 2006 PTD 734; 2009 SCMR 1279; 2001 PTD 1472 and 2010 PTD 1506 ref.

(b) Interpretation of Statutes---

----Redundancy cannot be attributed to any provision of a statute unless it did not fit in the whole scheme of such a statute.

Muhammad Farogh Naseem, Advocate.

Naveed Andrabi and Anwar Kashif, Advocates.

Saleem Mangrio, Advocate.

Chaman Lal, Advocate.

Muhammad Usman, Advocate

Dr. Tariq Masood, Additional Commissioner.

Muhammad Altaf Mun, Javed Farooqi, Kafeel Abbasi Advocates.

Ashfaq Ahmed Tagar, D.A.-G.

Dates of hearing: 24th, 25th, 26th April, 3rd, 4th and 7th May of 2012.

2013 P T D 1420

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

COMMISSIONER INLAND REVENUE, ZONE-II, KARACHI

Versus

Messrs KASSIM TEXTILE MILLS (PVT.) LIMITED, KARACHI

I.T.R.A. No.132 of 2011, decided on 7th May, 2013.

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

----Ss. 113(1) & 113(2)(c)---Benefit of S. 113(2)(c) of Income Tax Ordinance, 2001 to taxpayer on basis of losses declared in previous years, availability of---Scope---Section 113(2)(c) of Income Tax Ordinance, 2001 was not an exemption from tax imposed under charging provision of subsection (1) thereof---Provision of S. 113(2)(c) of the Ordinance would not apply to a case when tax was not payable under subsection (1) thereof---Principles.

(b) Interpretation of statutes---

----Fiscal statute---Two interpretation possible of a charging provision---Effect---Interpretation favouring taxpayer would be adopted.

Cape Brandy Syndicate v. Inland Revenue Commissioner (1921) 1 KB 64; Government of Pakistan and others v. Hashwani Hotels Ltd. PLD 1990 SC 68; A&B Food Industries Ltd. v. Commissioner of Income Tax 1992 SCMR 663 and Commissioner of Agricultural Income Tax v. B.W.M. Abdur Rehman 1973 SCMR 445 rel.

Pearl Continental Hotel and another v. Government of N.-W.F.P. and others PLD 2010 SC 1004; Anwar Ali and others v. Manzoor Hussain and another 1996 SCMR 1770; Searle (Pakistan) Ltd. v. Government of Pakistan and others PLD 1993 Kar 799; Pak-Kuwait Investment Co. (Pvt.) Ltd. v. Active Apparels International and others 2012 CLD 1036; Chenone Stores Ltd. v. Federal Board of Revenue and others 2012 PTD 1815; Lone Cold Storage v. Revenue Officer LESCO 2010 PTD 2502 and Naseem Mahmood v. Principal, King Edward Medical College and others PLD 1965 Lah. 272 distinguished.

(c) Interpretation of statutes---

----Fiscal statute---Exemption from tax, provision of---Two inter-pretations possible of such provision---Effect---Interpretation going against taxpayer would be adopted---Principles.

The onus lies on the taxpayer to show that his case comes within the exemption. In case two reasonable interpretations are possible, the one against the taxpayer will be adopted. But if the taxpayer's case comes fairly within the scope of exemption, then he cannot be denied the benefit of it on the basis of any supposed intention to the contrary of the legislature or authority granting it.

When two reasonable views of an exemption provision (or one that can be analogized to an exemption) are possible, the one against the taxpayer is to be adopted.

Amjad Javed Hashmi for Applicant.

Abdul Rahim Lakhani for Respondent.

Date of hearing: 24th April, 2013.

2013 P T D 1459

[Sindh High Court]

Before Faisal Arab, Sajjad Ali Shah and Aqeel Ahmed Abbasi, JJ

TATA TEXTILE MILLS LTD. Through Authorized Attorney/Representative, Karachi and 57 others

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division/FBR, Islamabad and another

Constitutional Petition No.D-857 of 2011, decided on 1st March, 2013.

(a) Words and phrases---

----"Fee"---Definition stated.

Chambers 21st Century Dictionary (Revised Edition); Black's Law Dictionary (Sixth Edition); Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13th Edition K J Aiyar; Legal Terms & Phrases 2006 Edition by M. Ilyas Khan and Supreme Court on Words and Phrases by Justice M. L. Singhal ref.

(b) Words and phrases---

----"Tax"---Definition stated.

Chambers 21st Century Dictionary (Revised Edition); Black's Law Dictionary (Sixth Edition); Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13th Edition K J Aiyar; Legal Terms & Phrases 2006 Edition by M. Ilyas Khan and Supreme Court on Words and Phrases by Justice M. L. Singhal ref.

(c) Words and phrases---

----"Tax" & "Fee"---Distinction stated.

Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13th Edition K J Aiyar; Legal Terms & Phrases 2006 Edition by M. Ilyas Khan; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Burmah Shell Ltd. v. Federation of Pakistan 1998 PTD 1804; Pakistan Flour Mills Association v. Government of Sindh 2003 SCMR 162; Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329 and Syed Nasir Ali v. Pakistan 2010 PTD 1924 ref.

(d) Constitution of Pakistan---

----Arts. 73 & 260(1)---Powers of Parliament to impose tax and fee or make amendments therein through Money bill---Scope stated.

Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Burmah Shell Ltd. v. Federation of Pakistan 1998 PTD 1804; Pakistan Flour Mills Association v. Government of Sindh 2003 SCMR 162; Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329 and Syed Nasir Ali v. Pakistan 2010 PTD 1924 rel.

(e) Interpretation of Constitution---

----Essential considerations stated.

(f) Interpretation of statutes---

----Constitutionality of a legislation would be presumed unless same being ex facie violative of constitutional provisions---Principles.

The law should be saved rather than be destroyed and the court must lean in favour of upholding of constitutionality of a legislation keeping in view that the rule of constitutional presumption is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex-facie it is violative of constitutional provisions.

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

----Ss.2(e)(ff), 3, 4, 5 & 6---Constitution of Pakistan, Arts. 73, 199 & 260(1)---Constitutional petition---Amendments introduced in Workers' Welfare Fund Ordinance, 1971 through Finance Act, 2006 and Finance Act, 2008---Validity---Such fund was not a fee as same was not a charge for providing any services by Government to its payer or to be utilized for benefit of its payer, rather might be utilized for benefit of workers---Levy of such Fund had all attributes of tax, thus, legislature had imposed a "tax" in nomenclature of such Fund on total income of an industrial establishment, which would be treated as liability of income tax thereof---Impugned amendment introduced did not suffer from any constitutional or legal infirmity---Principles.

Multiline Associates v. Ardeshir Cowasjee and others 1995 SCMR 362; Ardeshir Cowasjee and 10 others v. Karachi Building Control Authority (KMC), Karachi 1999 SCMR 2883; CIT v. Kamran Model Factory 2002 PTD 14; M. Ismail & Co. v. Chief Collector PLD 1966 SC 388; Pakistan Agricultural Storage and Service Corporation Ltd. v. Province of Punjab and another PLD 1989 Lahore 367; Collector of Customs v. Sheikh Spinning Mills 1999 SCMR 1402; Biafo Industries v. Federation of Pakistan 2000 CLC 170; Messrs Lever Brothers (Pakistan) Ltd., Karachi v. Market Committee, Rahimyar Khan PLD 1980 Baghdadul Jadid 23; Abdul Majid v. Province of East Pakistan PLD 1960 Dacca 502; Dr. Abdul Jamil v. Malik Nazar Mohyuddin and others PLD 1988 Pesh. 15; Sindh High Court Bar Association v. Federation of Pakistan PLD 2009 SC 789; Mir Muhammad Idris v. Federation of Pakistan PLD 2011 SC 213; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582; East Pakistan Chrome Tannery (P.) Ltd. v. Federation of Pakistan 2011 PTD 2643; Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; C.A. 1891 Unwin v. Hanson 115; Kawther Grain (Pvt.) Ltd. v. DCIT Gujranwala (1999 PTD 4028); Collector of Central Excise, Bombay-1 and another v. Messrs Parle Exports (P) Ltd. AIR 1989 SC 644; Messrs Hindustan Aluminum Corporation Ltd v. The State of U.P and another AIR 1981 SC 1649; Messrs Indian Cable Company Ltd. Calcutta v. Collector of Central AIR 1995 SC 64; Messrs Sohail Jute Mills Ltd.' case PLD 1991 SC 329 and Syed Nasir Ali v. Pakistan 2010 PTD 1924 ref.

Messrs Mutual Funds Association of Pakistan v. Federation of Pakistan 2010 PLC 306 rel.

(h) Interpretation of statutes---

----Preamble of a statute---Object---Preamble could be used as an aid to ascertain purpose of legislation, but not for determining it scope or validity.

(i) Interpretation of statutes---

----Fiscal statute---Charging provision---Object---Such provision would determine jurisdiction and scope of levy, define its mandate and subject from whom same would be charged and collected.

Dr. Muhammad Farogh Naseem, Khalid Javed Khan, Rashid Anwar, M. Anas Makhdoom, Anwar Kashif Mumtaz, Naveed A. Andrabi, Khalid Mehmood Siddiqui, Ghulam Murtaza, Lubna Pervez, Abid Shahban, Junaid Farooqi, Muhammad Rafi Kamboh, Kazim Hasan, Abdul Rahim Lakhani, Aminuddin Ansari, Ali Mumtaz Shaikh, Abdul Hameed Kazi, and Muhammad Adnan for Petitioners.

Amjad Javed Hashmi, Dr. Tariq Masood, Additional Commissioner (Legal), M. Asif Mangi, Standing Counsel, M. Sarwar Khan, Addl.A.G, Chaman Lal, S. Mohsin Imam, S. Riazuddin and Muhammad Saleem Mangrio for Respondents.

Date of hearing: 10th December, 2012.

2013 P T D 1568

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

MUHAMMAD ANWAR

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Pakistan Secretariat, Islamabad and 5 others

Constitutional Petition No. D-1259 of 2013, decided on 31st May, 2013.

Customs Act (IV of 1969)---

----S. 148, Second Sched. Part-II, Cls. (9) & (9A)---Income Tax Ordinance (XLIX of 2001), First Sched---S.R.O.140(I)/2013, dated 26-2-2013---Constitution of Pakistan, Art.199---Constitutional petition---Advance income tax on importation of goods, pay ability of---Petitioner claimed that advance income tax was collectable under S.148 of Customs Act, 1969 at reduced rates specified in Cls. (9) & (9-A) of Part-II of Second Sched., thereof, notwithstanding such clauses stood omitted by virtue of S.R.O. 140(I)/2013, dated 26-2-2013 by the time goods arrived in Pakistan as relevant acts of entering into contract of purchase or issuance of invoice or opening of letter of credit in respect thereof had been done before its issuance---Validity---Advance income tax being collected under S. 148 of Customs Act, 1969 could be regarded as customs duty---S.R.O. 140 would be prospective in operation---High Court accepted constitutional petition in circumstances.

Lucky Cement Ltd. v. Federation of Pakistan and others C.P. D-216 of 2013, decided on 26-2-2013; Al-Haj Industrial Corporation (Pvt.) Ltd. v. Collector of Customs (Appraisement) 2004 PTD 801 (DB); Crescent Pak Industries (Pvt.) Ltd. v. Federation of Pakistan and others 1990 PTD 29 (DB); Ahmed Investment (Pvt.) Ltd. v. Federation of Pakistan and another 1994 PTD 575 (DB); Hashwani Hotels Ltd. v. Government of Pakistan and others 2007 PTD 1473 and 2004 PTD 901 ref.

Al Samrez Enterprise v. Federation of Pakistan 1986 SCMR 817 and M.Y. Electronics Industries (Pvt.) Ltd. and others v. Government of Pakistan and others 1998 SCMR 1404 rel.

Sameer Ghazanfar, Khalid Javed Khan, Muhammad Ahmer, Ms. Ismat Mehdi, M. Afzal Awan, Aqeel Ahmed and Ghulam Nabi Shar for Petitioners.

Kashif Nazeer, Zaheer ul Hasan Minhas, Iqbal Khurram, Ghulam Haider Sheikh, Shakeel Ahmed and Ms. Masooda Siraj for Respondents.

S. Mohsin Iman, D.A.-G.

Dates of hearing: 8th and 22nd May, 2013.

2013 PTD 1592

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

COMMISSIONER INLAND REVENUE, LTU, KARACHI

Versus

KARACHI SHIPPING (PVT.) LTD., KARACHI

I.T.R.A. No.29 of 2011, decided on 13th February, 2013.

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

----S.133---Reference to High Court-Scope-Reference application involving question not raised by applicant before any forum below---Jurisdiction of High Court to entertain such question---Scope---Such question could not be said to be a question of law arising from impugned order---Neither High Court could ,entertain nor could , applicant be allowed to raise such question at belated stage---High Court declined to accept such question in circumstances.

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

----S.133---Reference application---Concurrent finding of facts by lower Appellate forums---Effect---Such findings would be binding on High Court.

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

----Ss.18 & 56---Deduction of business expenditure or loss from business income of taxpayer---Scope---Business expenditures were admissible---Absence of receipts of income during relevant tax period would be considered a business loss incurred by taxpayer, which could be set off against income earned under other heads provided under . S.56 of Income Tax Ordinance, 2001.

Genertech Pakistan Limited v. ITAT of Pakistan 2004 PTD 2255; AES Pakgen (Pvt.) Limited v. CIR in Civil Petitions Nos.2211-L and 2212-L of 2005 heard on 16-6-2006; 1999 PTD (Trib.) 708 and Khairatul Amin v. CIT, Karachi 2000 PTD 363 ref.

Kafeel Ahmed Abbasi for Petitioner.

Lubna Pervez for Respondent.

Dates of hearing: 16th January and 13th February, 2013

2013 P T D 1614

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

COMMISSIONER INLAND REVENUE-II, KARACHI

Versus

ROYAL INTERNATIONAL EXCHANGE COMPANY (PVT.) LTD., KARACHI

I.T.R.A. No.164 of 2012, decided on 22nd January, 2013.

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

----S. 133---Reference application---Facts found and accepted by Appellate Tribunal---Interference in such facts by High Court---Scope---High Court could consider only question of law---Misreading or non-reading of any material evidence by Tribunal would be a question of law---High Court would be bound to accept such facts.

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

----S.133---Reference application---Additional questions raised subsequently by applicant before High Court---Validity---Such questions being an attempt by applicant to re-agitate factual issues casted in different form, could not be permitted---High Court declined to consider such questions in circumstances.

Australasia Bank Ltd.'s case 1962 PTD 575 and Commissioner of Income Tax, Karachi v. Shabbir & Company, Karachi (1966) 13 Tax 197 ref.

Ch. Nazir Ahmed for Applicant.

Abid H. Shaban for Respondent.

Date of hearing: 22nd January, 2013.

2013 P T D 1659

[Sindh High Court]

Before Ghluam Sarwar Korai and Munib Akhtar, JJ

HABIB BANK LTD.

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and 5 others

C.P. No.D-371 of 2013, decided on 31st May, 2013.

(a) Limitation---

----Determination---Principle---Limitation can arise in three ways: Where there is an express time bar, imposed by statute; Where such bar can or is to be inferred from and on a proper reading and interpretation of relevant provisions; or where action has been taken beyond reasonable period of time.

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

----Ss.161 & 162---Amendment of assessment---Action against party---Limitation---Principle---Even if period for amendment of assessment has expired, action can still be taken against primary party under S.162 of Income Tax Ordinance, 2001.

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

----S.161---Initiation of proceedings---Limitation---Even though there is no period of limitation, a point in time must eventually be reached so that if action is to be taken thereafter, the same must be properly justified by Commissioner---Beyond stipulated point in time, onus lies on Commissioner to show as to why action is being taken belatedly and if he fails to discharge this onus, then proceedings would be liable to be set aside.

(d) Discretion---

----Exercise of---Principle---All discretion is structured, channelized and controlled and there is no such thing as unfettered discretion---Any and all statutory power must be exercised reasonably, fairly and justly.

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

----Ss.151, 161, 162 & 174---Constitution of Pakistan, Art.199---Constitutional petition---Non-deducting of tax---Proceedings---Limitation---Petitioners were banking companies and were aggrieved of notices issued by authorities for initiation of proceedings on the allegation of non-deduction of taxes---Validity---If Commissioner was to take action under S. 161 of Income Tax Ordinance, 2001 and the amount from which deduction had to be made was relatable to deducting authority's income then any such action taken beyond the period up to which deducting authority had to maintain its books of account etc., under S.174 of Income Tax Ordinance , 2001, required proper justification---Onus then would be on the Commissioner to explain as to why action was being taken belatedly---If there was proper justification, then onus was discharged and action could be sustainable in law---If there was no proper justification, then onus would not be discharged and action was liable to be set aside---Time fixed for purposes of S. 174 of Income Tax Ordinance, 2001, provided necessary dividing time line, as beyond such time deducting authority / taxpayer was not under any obligation to maintain books of account etc.---If Inland Revenue Department, in the present case, had been so minded, it could have taken action in question much earlier and well before the period stipulated in S. 174 of Income Tax Ordinance, 2001, had elapsed---Authorities did not do so and no proper justification was provided for belated action, onus that was on the Department, had not been discharged---Actions of authorities in question were not barred by limitation but the Department had failed to cross threshold of time related limiting factor---Actions in question were not sustainable and exercise of statutory power conferred by S. 161 of Income Tax Ordinance, 2001, was unlawful---High Court set aside notices and all proceedings taken on the basis thereof, including all orders made thereon or with reference thereto and the same were quashed---Petition was allowed in circumstances.

??????????? Commissioner of Income Tax v. Hossen Kasam Dada PLD? 1961 SC 375; Gulistan Textile Mills Ltd. v. Collector (Appeals) Customs Sales Tax and Federal Excise and another 2010 PTD 251; Commissioner of Income Tax v. Pakistan Mobile Communication (Pvt.) Ltd. 2009 PTD 1767; Commissioner of Income Tax v. Agha's Supermarket 2003 PTD 1571; Said Ghani v. Central Board of Revenue and others 1990 CLC 511; Commissioner of Income Tax v. Kamran Model Factory 2002 PTD 14; Commissioner of Income Tax v. NHK Japan Broadcasting Corporation (2008) 305 I.T.R. 137; State of Punjab v. Bhatinda District Co-op. Milk Producers Union Ltd. (2007) 11 SCC 363; Shahnawaz (Pvt.) Ltd. v. Pakistan and others 2011 PTD 1558 and Iqbal Hussain v. Federation? of? Pakistan? and? others? 2010? PTD? 2338? ref.

??????????? Ejaz Ahmed and Aijaz Shirazi for Petitioner (in C.P.D.-371 of 2013).

??????????? Naveed Andrabi and Anwar Kashif Mumtaz along with Messrs Usman Alam and Ammar Ather Saeed for Petitioners (in C.P.D.-373 of 2013).

??????????? Iqbal Salman Pasha for Petitioners (in C.P. D-551 of 2013).

??????????? Kafeel A. Abbasi and Mohsin Imam along with Dr. Tariq Ghani, Additional Commissioner of Income Tax for the Inland Revenue Department.

??????????? Jawed Farooqui, D.A.-G.

??????????? Dates of hearing: 21st, 26th, 27th and 28th February, 2013.

2013 P T D 2025

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

COLLECTOR OF CUSTOMS and another

Versus

IBRAHIM FIBERS LTD. through General Manager (Import)

High Court Appeal No.267 of 2009, decided on 17th July, 2013.

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

----Ss. 19(3) [as inserted by Customs (Amendment) Ordinance (XLVIII of 2002) w.e.f. 7-6-2002], 30 & 31-A---Protection of Economic Reforms Act (XII of 1992), S.6---S.R.O.369(I)/2000, dated 17-6-2000---S.R.O. 439(I)/2001, dated 18-6-2001---Polyester Staple Fibre Manufacturing Plant, import of---First unit of such plant arrived in Pakistan in May, 2001 on basis of Bill of Entry dated 10-5-2001---Bill of Entry for second unit of such plant filed after 19-6-2001---S.R.O. 369(I)/2000, dated 17-6-2000 exempting such plant from customs-duty was amended subsequently vide S.R.O. 439(I)/2001, dated 18-6-2001---Demand of customs-duty @ 5% ad valorem on import of such second unit of plant under S.R.O. 439(I)/2001---Plea of importer was that second unit being part of one plant was in continuation of first unit, thus second unit was entitled to complete exemption from customs-duty under S.R.O. 369(I)/2000---Validity---Such second unit for being a separate plant could not be regarded as spare parts being imported for use in first imported unit already installed---Import of complete plant in one or successive shipments and its arrival in different lots and at different times would be irrelevant for such S.R.Os.---Shipment of complete unit in different lots would not and could not mean nor did such S.R.Os. require that such shipments be treated or regarded as one composite whole---Both such imported units would be treated and dealt with separately on basis of law applicable at time of filing of Bill of Entry for each unit---Provisions of subsection (3) inserted in S.19 of Customs Act, 1969 w.e.f. 7-6-2002 would not take away benefit accrued to an importer having filed Bill of Entry prior to such date, thus, same would not apply in relation to both such units---S.R.O. 369(I)/2000 for not having a specific term of its duration was not covered by S.6 of Protection of Economic Reforms Act, 1992, thus, protection and benefit provided thereunder would not apply to such S.R.O.---S.R.O. 439(I)/2001 was in force when Bill of Entry for second unit was filed, thus, importer would be entitled to exemption in respect of second unit in terms thereof and not otherwise.

Ibrahim Fibres Ltd. v. Collector of Customs (Appraisement) and another 2009 PTD 1902; Nishat Mills Ltd. v. Federation of Pakistan 2005 PTD 495; Karim Ghee and Oil Mills (Pvt.) Ltd. v. Federation of Pakistan and others 2005 PTD 634; Sitara Chemical Industries Ltd. v. Collector of Customs (Appraisement) and another 2005 PTD 729; Fecto Belarus Ltd. v. Government of Pakistan and others 2009 PTD 390; Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others 1993 SCMR 1905; Al-Hamra Industries v. Federation of Pakistan 2005 PTD 2505; Gatron and Bhadilia Industries Ltd. v. Government of Pakistan and others 1999 MLD 2994; Commissioner of Income Tax v. Gulf Edible Oils (Pvt.) Ltd. 2006 PTD 2854; Elahi Cotton Mills v. Federation of Pakistan PLD 1997 SC 582; Celanese Pakistan Ltd. v. Government of Pakistan and others 2002 PTD 2874 and Lucky Cement Ltd. v. Central Board of Revenue and others PLD 2001 Pesh. 7 ref.

(b) Protection of Economic Reforms Act (XII of 1992)---

----S. 6 & Sched.---Protection of fiscal incentives for setting up of industries---Applicability---Such protection would be applicable, if notification issued under fiscal statute had a specific term for its duration, otherwise not---Principles.

Section 6 in relation to "fiscal incentives" provided "for investment" through "statutory orders listed in the Schedule to the Protection of Economic Reforms Act, 1992 "or otherwise". In respect of such fiscal incentives, section 6 provides that they "shall continue in force for the term specified therein" and will not be "altered to the disadvantage of the investors". For section 6 to be applicable, the relevant "statutory order" must have a "term" specified "therein". The reason is obvious. If no such term is specified therein, then the prohibition contained in the Section (which is protection thereby provided) would not be applicable. Thus, in respect of a notification issued under a fiscal statute, it must have a specific term for its duration, as specified therein. It is only then the protection of Section 6 is applicable. This is also clear from the notifications listed in the Schedule to the Act.

The protection provided by Section 6 is specifically and directly linked to the requirement that the notification have a specific period or duration specified in it.

Sarfraz Ali Metlo for Appellants.

Kh. Shamsul Islam for Respondent.

Dates of hearing: 12th and 20th March, 2013.

2013 P T D 2048

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

CIVIL AVIATION AUTHORITY OF PAKISTAN through Airport Manager

Versus

SINDH REVENUE BOARD through Chairman and 2 others

C.P. No.D-2643 of 2012, decided on 10th July, 2013.

Sindh Sales Tax on Services Act (II of 2011)---

----S.3---Constitution of Pakistan, Arts. 165, 165-A & 199---Constitutional petition---Provincial sales tax---Taxable services---Exemption---Civil Aviation Authority contended that it was a statutory body and not liable to pay provincial sales tax on services---Validity---Terms "income" and "property" as used in relation to taxation in Art.165 of the Constitution, were to be given broad meaning and the same were not confined to narrow and strict meaning---Inter-governmental immunity granted by Art. 165 of the Constitution was lifted in relation to provincial entities in respect of income tax by Art.165-A of the Constitution, expressly provided therein and by extension thereof in relation to federal sales tax---Provincial sales tax levied by and under Sindh Sales Tax on Services Act, 2011, was within the broad meaning to be given to "income" in Art. 165 of the Constitution---Inter-governmental immunity from provincial sales tax was available to Civil Aviation Authority, just as immunity from octroi was available to Pakistan Telecommunication Corporation---Civil Aviation Authority was not liable to pay tax under Sindh Sales Tax on Service Act, 2011, and all demands made, proceedings initiated, orders passed or notices issued to the Authority by Provincial Government were quashed and set aside---Petition was allowed accordingly.

Karachi Development Authority v. Central Board of Revenue and others 2005 PTD 2131 distinguished.

Province of N.-W.F.P. v. Pakistan Telecommunication Corporation and others PLD 2005 SC 670 fol.

Central Board of Revenue v. SITE PLD 1985 SC 97; Zafar Ali Shah v. Parvez Musharraf Chief Executive of Pakistan and others PLD 2000 SC 869; Rice Export Corporation of Pakistan Ltd. v. Karachi Metropolitan Corporation and another PLD 1990 Kar. 186; Union Council Allah Wahan Sukkur v. Associated Cement (Pvt.) Ltd. 1993 SCMR 468; Barwick v. The English Joint Stock Bank (1866) LR 2 Exh. 259 and Lloyd v. Grace, Smith and Co. (1912) AC 716 ref.

Salman Talibuddin for Petitioner.

Faisal Siddiqui along with Mohmed Vawda for Respondent No.1.

Hamid Munir, A.A.-G.

Dates of hearing: 21st March and 3rd April, 2008 and 23rd May, 2013.

2013 P T D 2095

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs QUALITY TEXTILE MILLS LTD.

I.T.R.A. No.133 of 2011, decided on 31st May, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.4(4)(b), 67, 154 & 169---Income Tax Rules, 2001, Rr.13 & 231---Income derived from export of cotton yarn---Expenses (i.e. ocean freight, export development surcharge, surcharge, clearing/forwarding expenses and those in relation to bills of exchange), incurred by taxpayer in deriving such income---Taking into account such export related expenses in computing taxable income on local sales of yarn by taxpayer---Scope---Application of R. 231 of Income Tax Rules, 2001 in preference to R. 13 thereof would not be possible as both such Rules had entirely different and separate subjects matters---Rule 13(6)(e) Income Tax of Rules, 2001 pertaining specifically to Pakistan-source of income chargeable under head "income from business" would cover local sales of yarn, thus, expenses attributable thereto would be deductable in full against local sales to determine income in terms of normal tax regime---Export related expenses could not be taken into consideration in computing taxable income on local sales---Principles.

1999 PTD (Trib.) 3880; 2003 PTD (Trib.) 1053; Golden Graphics (Pvt.) Ltd. v. Director of Vigilance and others 1993 SCMR 1635; Ch. Pervaiz Elahi v. Province of Punjab and others PLD 1993 Lah. 595 and Bama Charan v. Additional Commissioner of Taxes and others AIR 1964 Calcutta 332 ref.

Amjad Javed Hashmi for Applicant.

Mushtaq Hussain Kazi for Respondent.

Dates of hearing: 18th April and 14th May, 2013.

2013 P T D 391

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

Messrs LALA MUSA FLOUR AND GENERAL MILLS, GUJRAT through Managing Partner

Versus

CHAIRMAN, FEDERAL BOARD OF REVENUE, ISLAMABAD and 3 others

Writ Petition No.15432 of 2012, decided on 5th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----S. 177---Sales Tax Act (VII of 1990), S.25---Federal Excise Act (VII of 2005), S.46---Constitution of Pakistan, Art.199---Constitutional petition---Implementation of judgment---High Court in petitioners earlier constitutional petition had held that notices issued to petitioners by Commissioner Inland Revenue under S.177 of the Income Tax Ordinance, 2001; under S.25 of Sales Tax Act, 1990 and S.46 of Federal Excise Act, 2005 selecting their cases for audit of their tax affairs were illegal and without lawful authority and that such authority only lay with the Federal Board of Revenue through Computer Balloting---Petitioners sought implementation of the judgment passed by High Court in constitutional petition filed by it earlier---Validity---Held, authorities were essentially required to comply and follow judgment passed by High Court until and unless it was reversed or some interim relief was granted by the Supreme Court in favour of authorities, which did not exist till that date---High Court directed the authorities to comply with judgment passed by it in earlier constitutional petition---Petition was disposed of accordingly.

Tahir Mobeen Ashraf for Petitioner.

Saeed ur Rehman for Respondents.

2013 P T D 398

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs PREMIER INDUSTRIAL CHEMICAL MANUFACTURING CO.

Versus

COMMISSIONER INLAND REVENUE and 3 others

Writ Petition No.30786 of 2012, heard on 28th December, 2012.

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

----S.214C---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VIII of 2005) S. 42B---Constitution of Pakistan, Art. 199---Constitutional petition---Audit of taxpayer---Selection for audit---Petitioners, in the present cases, impugned notices for selection of their audit under S. 214C of the Income Tax Ordinance, 2001, S. 72B of the Sales Tax Act, 1990 and S. 42B of the Federal Excise Act, 2005---High Court on basis of consensus of the parties, set aside impugned notices and framed guidelines concerning parameters for selection of audit with the direction to the Federal Board of Revenue to initiate the process afresh in the light of the said guidelines and in full compliance with the mandate given under S. 214C of the Income Tax Ordinance, 2001, S. 72B of the Sales Tax Act, 1990 and S. 42B of the Federal Excise Act, 2005.

Following are the guidelines for parameters as framed by the High Court for selection for audit of taxpayer's cases. Federal Board of Revenue in terms of section 214C of the Income Tax Ordinance, 2001, section 72B of the Sales Tax Act, 1990 and Section 42B of the Federal Excise Act, 2005, shall frame three separate sets of parameters for selection of cases for audit under the three said tax laws; that after the selection process has been carried out independently under all the three tax laws, if the Federal Board of Revenue wishes to further narrow down the selection through carrying out risk analysis (as already done in the present case) the same may be done separately under each tax law; that a day or so prior to the selection of cases for audit the Federal Board of Revenue shall publicize the parameters settled, in the said manner, for the concerned tax year in the print media, as well as, upload the same on the website of Federal Board of Revenue to facilitate the taxpayers; that notices (separate notices under different tax laws) issued to the taxpayers selected for audit shall clearly specify the parameters attracted in their cases in order to make the process transparent; and that the Federal Board of Revenue will also consider establishing a Grievance/Review Panel to attend to the issues/questions arising out of the audit selection process, which will alleviate the anxiety of the taxpayers and might also avoid further litigation.

Further, High Court set aside the impugned notices for selection of audit for the Tax Year 2011 with the direction that the Federal Board of Revenue will initiate the process of audit afresh in the light of the above guidelines and fully comply with the mandate given under section 214C of the Income Tax Ordinance, 2001, section 72B of the Sales Tax Act, 1990 and section 42B of the Federal Excise Act, 2005.

(b) Federal Board of Revenue Act (IV of 2007)---

----S. 8---Federal Board of Revenue Rules, 2007, R. 3---Income Tax Ordinance (XLIX of 2001) S. 214C---Sales Tax Act (VII of 1990), S.72B---Federal Excise Act (VIII of 2005), S. 42B---Constitution of Pakistan, Art. 199---Constitutional petition---Delegation of functions and powers by the Federal Board of Revenue---Letter detailing parameters for selection for Audit of taxpayers was issued and signed by Chief (Taxpayer's Audit) and did not have the approval of the Federal Board of Revenue and no specific notification was issued delegating powers under audit provisions in favour of Member (Audit)---Counsel for Federal Board of Revenue gave assurance to the High Court that on re-initiation of the audit process afresh, the Federal Board of Revenue would reconsider the question of delegation---Constitutional petition was allowed accordingly.

Naveed A. Andrabi and Javed Iqbal Qazi, Imtiaz Rashid Siddiqui, Shaharyar Kasuri, Shahbaz Butt, M.M. Akram Awan, Mian Muhammad Javed, Muhammad Ajmal Khan, Muhammad Anwaar-ul-Haq and Mian Masood Ahmad for Petitioner.

Muhammad Ilyas Khan along with, M. Majid Qureshi, Chief, (Taxpayer's Audit) Nadim Rizvi, Commissioner Inland Revenue and Dr. Tariq Masood, Additional Commissioner FBR (HQ) for Respondents.

Dates of hearing: 26th, 27th and 28th December, 2012.

2013 P T D 463

[Lahore High Court]

Before Rauf Ahmad Shaikh and Syed Iftikhar Hussain Shah, JJ

COLLECTOR, MODEL CUSTOMS COLLECTORATE, MULTAN

Versus

Messrs TREND INTERNATIONAL through Partner and 4 others

I.C.A. No.164 of 2011 in W.P. No.11062 of 2010, decided on 7th November, 2012.

Customs Act (IV of 1969)---

----S. 81---Law Reforms Ordinance (XII of 1972), S.3---Intra Court Appeal---Import of goods---Provisional determination of liability---Scope---Appellant (Customs Collector) impugned order of High Court whereby Constitutional petition filed by respondent-assessee was allowed, and demand notices for final assessment of goods imported by the respondent-assessee were set aside---Goods imported were provisionally assessed at a lower rate, thereafter, after about two years nine months, final assessment for the same was made at an enhanced rate and demand notices were issued to the respondent-assessee---Contention of the assessee was that final assessment was made after about two years and under S. 81(2) of the Customs Act, 1969, the maximum time period to finalize assessment was one year---Validity---Under S. 81(2) of the Customs Act, 1969 final assessment of customs duty and other taxes payable on import of goods was to be made within one year of provisional assessment of clearance of goods and in exceptional circumstances, a grace period of ninety days was provided which could be consumed for finalization of the matter in one year and ninety days---Inordinate delay of more than two years and nine months, in the present case, remained unexplained and no exceptional circumstance justifying the same was put forth by the department---Contention that the delay was a result of time consumed in obtaining final results of analysis/tests was without force and the assessment was made at a specific rate and had thus become final in view of S. 81(4) of the Customs Act, 1969---Intra-court appeal was dismissed, in circumstances.

2005 PTD 2116 ref.

2011 PTD 1185 and 2004 PTD 795 rel.

Ahmad Raza for Appellant.

Mian Abdul Basit for Respondent No.1.

2013 P T D 512

[Lahore High Court]

Before Umar Ata Bandial and Muhammad Farrukh Irfan Khan, JJ

COLLECTOR SALES TAX, FAISALABAD

Versus

Messrs CRESCENT TEXTILE MILLS

Sales Tax Reference No.64 of 2009, decided on 23rd February, 2012.

Sales Tax Act (VII of 1990)---

----S. 47---High Court Reference---Authority to file reference under S.47 of the Sales Tax Act, 1990---Scope---Reference application filed by Collector Sales Tax had not been signed by or on behalf of the Collector Sales Tax---Contention of counsel for the Collector Sales Tax was that power of attorney in favour of the counsel had been issued by the Collector Sales Tax and therefore, reference should be deemed to have been filed by the Collector Sales Tax---Validity---Said contention did not have merit and authorization contemplated in S. 47 of the Sales Tax Act, 1990 could only be in favour of an officer of the Sales Tax Department---Reference was dismissed.

Director, Directorate General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd., and others 2006 SCMR 129 and Messrs Ittehad Textile Industries (Pvt.) Ltd., v. Collector of Sales Tax Collectorate of Sales Tax and Central Excise, Faisalabad and others 2007 PTD 663 ref.

Sarfraz Ahmed Cheema for Applicant.

Shoaib Ahmed Sheikh for Respondent.

2013 P T D 581

[Lahore High Court]

Before Ijaz ul Ahsan, J

GHULAM NABI and 3 others

Versus

FEDERATION OF PAKISTAN through Member Customs (Legal) Revenue Division FBR, Islamabad and 3 others

Writ Petition No.21507 of 2011, decided on 22nd October, 2012.

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

----Ss. 156 & 157---S.R.O. 574(I)/2005 dated 6-6-2005 [as amended by S.R.O. 499(I)/09 dated 13-6-2009]---Constitution of Pakistan, Art.199---Constitutional petition---Seizure of goods---Release of confiscated old and used serviceable auto-parts under benefit of S.R.O. 574(I)/2005 dated 6-6-2005 (as amended by S.R.O. 499/2009 dated 13-6-2009)---Retrospective effect of S.R.Os.---Scope---Petitioners were aggrieved of the order whereby benefit of amending S.R.O. 499(I)/2009 dated 13-6-2009 for redemption of goods on payment of fine was denied to them on the ground that the said S.R.O. could not be given retrospective effect as it came into existence subsequent to confiscation of the petitioners' goods---Contention of Customs Authorities inter alia, was, that said amending S.R.O. could not be given retrospective effect since the case of the petitioners was a past and closed transaction---Validity---Proceedings related to confiscation of goods were still pending before Supreme Court when the amending S.R.O.-499(I)/2009 dated 13-6-2009 was introduced and therefore, the argument that the present case was a past and closed transaction did not hold force---Present matter was still pending when it was specifically withdrawn for the purpose of availing the benefit that had become available to the petitioners by virtue of the amendment in law---Concessionary S.R.O., notification, regulation or executive order could be given retrospective effect if it went to the comfort of the taxpayer---Petitioners, therefore, were entitled to the benefit of the said S.R.Os.---High Court directed the Customs authorities to extend option of redemption of goods on payment of fine to the petitioners as visualized in amending S.R.O. 499(I)/2009 dated 13-6-2009---Constitutional petition was allowed, accordingly.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan 1992 SCMR 1652; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/O Finance, Islamabad and 6 others PLD 1997 SC 582; Collector of Customs, Lahore v. A.A. Corporation, Lahore 2004 PTD 2738; Mrs. Shahida Anwar v. Deputy Collector Customs, Lahore and 4 others 2009 PTD 1860; Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 and Central Board of Revenue and others v. Chanda Motors 1993 SCMR 39 rel.

(b) Interpretation of statutes----

----Tax statutes---Delegated legislation---Amendment in law/notification---Retrospective effect of such amendment---Scope---Concessionary notification, regulation or executive order could be given retrospective effect if it went to the comfort of the taxpayer.

Collector of Customs, Lahore v. A.A. Corporation, Lahore 2004 PTD 2738 rel.

Mian Abdul Ghaffar for Petitioners.

Sarfraz Ahmad Cheema along with Asad Khan Inspector ASO for Respondents.

2013 P T D 636

[Lahore High Court]

Before Ijaz ul Ahsan, J

Messrs SAGHIR CO. through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary

Writ Petition No.18405 of 2011, decided on 12th June, 2012.

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

----Ss. 25D & 25---Constitution of Pakistan, Art. 199---Constitutional petition---Import of goods---Determination of customs valuation---Determination ruling by Director Valuation to have effect from date of original order---Consignment of petitioners was released on basis of provisional assessment and submission of post-dated cheques---Petitioners (importers) filed review petition under S. 25D of the Customs Act, 1969 which was allowed by Director Valuation by giving fresh valuation rates for the determination of customs duties---Contention of the petitioners was that consignment of petitioners should be finally evaluated on basis of said fresh valuation rates determined by the Director Valuation---Contention of the Customs Authorities, however, was that fresh valuation rates could not be applied retrospectively---Held, that, original valuation was sought to be revised by way of a revision application before Director Valuation and the subsequent ruling was a result of such a revision and would be deemed to have taken effect from the date when the original ruling was given---No lawful or logical reason was available to burden the petitioner with the effect of a valuation ruling, which the department itself found erroneous---Argument that the fresh valuation could not have retrospective effect, was not correct and it would be just and fair that the petitioner be given benefit of the revised ruling---High Court directed that provisional assessment of the petitioner's goods be finalized on basis of fresh valuation ruling---Constitutional petition was allowed, accordingly.

(b) Administration of justice---

----Administrative ruling---Benefit of ambiguity or error, if any, relating to status or interpretation of a ruling must go to the taxpayer.

Mian Abdul Ghaffar for Petitioner.

Sarfraz Ahmad Cheema for Respondent.

2013 P T D 679

[Lahore High Court]

Before Ijaz ul Ahsan and Muhammad Ameer Bhatti, JJ

MUHAMMAD IQBAL

Versus

SENIOR INTELLIGENCE OFFICER, INTELLIGENCE AND INVESTIGATION (CUSTOMS, EXCISE AND SALES TAX), 'KHUS9AB and 2 others

Customs Reference No.22 of 2006, decided on 25th October, 2012.

Customs Act (IV of 1969)---

----S.194-B---Reference to High Court---Order of Appellate Tribunal---"Hearing ", scope of---Order passed without affording the counsel of an opportunity of hearing---Effect---Contention of petitioner was that the Appellate Tribunal had committed an error of law by dismissing his appeal vide a short order without affording his counsel an opportunity of hearing when his counsel was not present on the day of hearing--Validity---Record showed that on the day of hearing the Appellate Tribunal was informed that appellant's counsel was out of city, yet, the Appellate Tribunal proceeded to dismiss the appeal on merits without recording reasons for the same---Detailed judgment did not follow for the next six months, and in the said detailed judgment arguments attributed to the petitioner were reproduced front the "grounds of appeal" filed by the petitioner---Reproduction of certain grounds of appeal did not constitute "hearing" as required by law---Tribunal fell in error while dismissing appeal of petitioner without affording an opportunity of a meaningful hearing to the counsel for the petitioner---High Court set aside order of Appellate Tribunal and remanded the matter to the Appellate Tribunal---Reference was allowed, in circumstances.

Pakistan State Oil Company Ltd. v. Collector of Customs 2005 PTD 709 rel.

Mian Abdul Ghaffar for Petitioner.

Ms. Kausar Parveen for Respondents with Muhammad Ashiq Shahid, Senior Intelligence Officer Intelligence Investigation, Khushab.

2013 P T D 713

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

ALIF PLASTIC INDUSTRY

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.20175 of 2012, decided on 23rd January, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 38 & 25---Constitution of Pakistan, Art. 199---Constitutional petition---Investigative Audit under S. 38 of the Sales Tax Act, 1990---Scope---Notice containing specific allegation was not a random selection for audit---Petitioner (taxpayer) impugned notice of inquiry proceedings instituted against him under S. 38 of the Sales Tax Act, 1990---Contention of the petitioner was that Department could not select petitioner for audit without first completing audit under S. 25 of the Sales Tax Act, 1990---Validity---Department issued notice to the petitioner calling for record and as such did not act in a manner contrary to S. 38 of the Sales Tax Act, 1990 which specifically dealt with access into the premises of a registered person---Impugned notice had been issued as a preliminary step into an investigation by simply calling for the record and reference to S. 38 of the Sales Tax Act, 1990 made on the impugned notice puts the petitioner to notice that there was an inquiry or investigation for tax fraud and details of the nature of the fraud were also stated in the notice---Department, thus had a reason to investigate the record of the petitioner and therefore, the impugned notice did not offend the mandate of S. 38 of the Sales Tax Act, 1990---Present case was not a case of random selection or composite audit but one of tax fraud in presence of a specific allegation against the petitioner---Mere issuance of the impugned notice did not mean that a case of tax fraud had been decided against the petitioner and did adversely affect any right of the petitioner---Constitutional petition was dismissed, in circumstances.

Writ Petition No.393 of 2012 distinguished.

Muhammad Noman Yahya for Petitioner.

Sh. Nadeem Anwaar for Respondents.

Date of hearing: 15th January, 2013.

2013 P T D 821

[Lahore High Court]

Before Ibad-ur-Rehman Lodhi, J

Messrs YASIR ENTERPRISES through Ch. Basher Ahmed

Versus

FEDERATION OF PAKISTAN through Secretary and 7 others

Writ Petition No.6435 of 2009, heard on 21st January, 2013.

Customs Act (IV of 1969)---

----Ss. 179 & 169---Criminal Procedure Code (V of 1898), S. 265-K---Constitution of Pakistan, Art. 199---Constitutional petition---Alternate remedy----Import of goods---Prevention of smuggling---Quashing of F.I.R.---Consignment of petitioner was seized, show-cause notice was issued, and simultaneously a criminal F.I.R. in relation to smuggling was registered against the petitioner---Order-in-original was passed against the petitioner which was set aside by Customs Appellate Tribunal on the ground that the same was in violation of S. 179(3) of the Customs Act, 1969 and entire proceedings against petitioner were declared void ab inito---Said order having not been assailed by filing of Reference within prescribed period of limitation had attained finality---Petitioner, inter alia, sought quashing of the F.I.R. registered against him whereas the Department contended that petitioner had an alternate remedy available under S. 265-K Cr.P.C., therefore Constitutional petition was not maintainable---Held, that when the show cause notice had lost any relevance and efficacy, it could not be expected that the criminal court, on the same facts and material, could take some other view---Proceedings under S. 265-K of Cr.P.C. could only be pressed if challan was pending and trial had commenced; which had not happened in the present case---Since trial had not commenced there was no occasion with the Trial Court to frame a charge, therefore, it could not be said that remedy under S. 265-K Cr.P.C. was available to the petitioner---Since matter had become redundant, it would be an illusion to send the petitioner to face trial and the case was fit and proper for exercise of Constitutional jurisdiction of High Court---High Court directed that F.I.R. against the petitioner be quashed as there was no possibility of conviction, since the matter had become redundant---Constitutional petition was allowed, in circumstances.

Mian Abdul Ghaffar for Petitioner.

Muhammad Akhtar Qureshi with Syed Muhammad Ali Rizvi, Deputy Superintendent for Respondents Nos.2 to 8.

Date of hearing: 21st January, 2013.

2013 P T D 837

[Lahore High Court]

Before Syed Mansoor Ali Shah and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER INLAND REVENUE (LEGAL)

Versus

COMMISSIONER INLAND REVENUE (APPEALS) and others

I.T.R. No.41 of 2011, heard on 12th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss.121(1)(d) & 177 (10) [as prior to amendment vide. Finance Act, (XVI of 2010] & 133---High Court Reference---Best judgment assess-ment---Department sought reference of the High Court on the question "whether assessment under S. 121(1)(d) of the Income Tax Ordinance, 2001 could be made in cases where deemed assessment order had already been made under S. 120 of the Ordinance"---Assessee, in the present case, had filed return of total income under S.120 of the Income Tax Ordinance, 2001 and thereafter his case was selected for audit and another assessment order under S. 121(1)(d) of the Ordinance was made---Held, for the tax period under discussion in the present case, the legislative scheme during that time, and before amendment vide Finance Act, 2010; did not provide for cancellation or annulment or amendment of the deemed assessment order passed under S.120 of the Income Tax Ordinance, 2001 by a best judgment assessment order under S. 121(1)(d) of the Ordinance---Amendment made in Ss. 121(1)(d) and 177(10) of the Ordinance vide Finance Act, 2010 established that the un-amended versions of Ss. 121(1)(d) and 177(10); did not provide for cancellation or amendment of the deemed assessment order thereby identifying a lacuna that existed in the law prior to the amendment by the Finance Act, 2010---High Court observed that prior to amendment in Ss. 121(1)(d) and 177(10), S.121(1)(d) did not apply to cases where return of total income had been filed and did not envisage a second assessment order---High Court answered the reference in the negative, accordingly.

Department v. Assesee 2010 PTD (Trib.) 2602 ref.

Glaxo Laboratories Ltd. v. Inspecting Assistant Commissioner of Income Tax and others 1992 SCC 910 rel.

Ms. Shahina Akbar, along with Khalid Javed, Additional Commissioner and Farooq A. Nasir, Additional Commissioner for Petitioners.

Hafiz Muhammad Idrees for Respondent No.3.

Date of hearing: 12th November, 2012.

2013 P T D 884

[Lahore High Court]

Before Syed Mansoor Ali Shah and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs KHAN CNG AND FILLING STATION and others

I.T.R. No.31 of 2012, heard on 12th November, 2012.

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

----Ss. 122(5), 120 & 133---High Court Reference---Assessee, a CNG filling station---Amendment of Assessments---"Definite information obtained from audit or otherwise"---Word "otherwise", connotation of---Scope---Any information which is incomplete, or requires further processing, does not constitute "definite information"---Department had obtained an internal formula of Oil and Gas Regulatory Authority under S. 176 of the Income Tax Ordinance, 2001 and using said formula, had worked out the monthly sales of the assessee (CNG station)---Contention of the Department was that the said internal formula namely, the "OGRA formula" amounted to "definite information" for the purpose of amendment of assessment under S.122(5) of the Income Tax Ordinance, 2001 as it determined the quantum of sales of the assesse taxpayer---Validity---Said formula, which did not enjoy the backing of law, simply demonstrated an in-house, self styled methodology adopted or evolved by the Department to arrive at the total sales of the assessee taxpayer hence the said information passed for an opinion or estimate rather than "definite information" made available through audit or otherwise---Term "definite information" used in S. 122(5) of the Income Tax Ordinance, 2001 was not just an information, but information that was definite enough to satisfy a concerned officer that income chargeable to tax of an assessee had escaped assessment or total income of an assessee had been under-assessed---"Definite" meant indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried---Information in a definite, final and conclusive form must already exist in some document or record at the time of acquisition and any information which was incomplete or required further processing fell outside the domain of "definite information" and could at best pass for a departmental opinion, judgment, approximation or estimate---Word "otherwise" used in S. 122(5) of the Ordinance meant methodology akin or similar to audit, where some determined, final, certain, indisputable, and calculated information was picked up from any available record of the assessee---Word "otherwise" used in said section did not mean putting information through further process of calculation by the department---Word "acquired" used in S. 122(5) of the Income Tax Ordinance, 2001, which literally meant "gain possession of" connoted that the information already existed and had to be picked up from the records or documents and provided no margin for incomplete, imprecise, and inexact information to be completed through further calculation or processing as that would not be acquiring information but analyzing it---Said formula, in the present case, required that the department complete the information by working out total sales which exercise, required feeding of different variables and then arriving at a figure of total sales made by assessee ; and therefore, it did not constitute "definite information" acquired through audit or otherwise but was rather a departmental opinion---High Court observed that the OGRA Formula was not "definite information" upon which amendment could be made in the assessment of taxpayer, and accordingly, answered the reference in negative.

Income Tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108 and Inspecting Assistant Commissioner and Chairman, Panel 20 Companies and another v. Pakistan Herald Ltd. through Director, Finance and Corporate Affairs 1997 SCMR 1256 distinguished.

E.F.U. General Insurance Ltd. and others v. The Federation of Pakistan and others PLD 1997 SC 700 = 1997 PTD 1693; Inspecting Assistant Commissioner and another v. Pakistan Herald Ltd. 1997 SCMR 1256; Income Tax Officer and another v. Chappal Builders 1993 SCMR 1108 and Abdul Hamid and others v. Deputy Collector, Excise and Taxation/Income Tax Officer & C.I.T. and others 1988 PTD 324 ref.

The Free Dictionary by Farlex; Reading Law-The Interpretation of Legal Texts by Antonin Scalia and Bryan A Garner-West-2012, Page 428; Messrs E.F.U. General Insurance Co. Limited v. The Federation of Pakistan and others PLD 1997 SC 700 = 1997 PTD 1693; Income Tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108; Inspecting Assistant Commissioner and Chairman, Panel 20 Companies and another v. Pakistan Herald Ltd. through Director, Finance and Corporate Affairs 1997 SCMR 1256; Messrs Citibank N.A. through Resident Vice President v. Commissioner of Income Tax 2007 PTD 1560; A.N. Lakshman Shenoy v. The Income Tax Officer, Ernakulam and another AIR 1958 SC 795; Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232; Messrs Pakistan Educational Society v. The Government of Pakistan through Chairman and Secretary, Revenue Division, Islamabad and 2 others 1993 PTD 804; Republic Motors Ltd. v. Income Tax Officer and others 1990 PTD 889; Philips Electrical Company of Pakistan (Pvt.) Limited v. Income-Tax Officer, Companies Circle B-3, Karachi and another 1990 PTD 389 and Abdul Hamid and others v. Deputy Collector, Excise and Taxation/Income Tax Officer and C.I.T and others 1988 PTD 324 rel.

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

----S. 122(5)---Amendment of assessment---"Definite information obtained from audit or otherwise"---Interpretation---Word "otherwise", connotation---Word "acquired", connotation---Word "otherwise" used in S. 122(5) of the Ordinance meant methodology akin or similar to audit, where some determined, final, certain, indisputable, and calculated information was picked up from any available record of the assessee---Word "otherwise" used in said section did not mean putting information through further process of calculation by the department---Word "acquired" used in S. 122(5) of the Income Tax Ordinance, 2001, which literally meant "gain possession of" connoted that the information already existed and had to be picked up from the records or documents and provided no margin for incomplete, imprecise, and inexact information to be completed through further calculation or processing as that would not be acquiring information but analyzing it.

(c) Words and Phrases---

----"Definite"---Connotation---"Definite" meant indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried.

The Free Dictionary by Farlex rel.

(d) Ejusdem generis, doctrine of---

----Meaning---Literal meaning of the doctrine is "of the same kind or class"----Where general words follow an enumeration of two or more things, they apply only to persons or things of the same general kind or class specifically mentioned.

Reading Law-The Interpretation of Legal Texts by Antonin Scalia and Bryan A Garner-West-2012, Page 428 rel.

G.M. Chaudhry and Qazi Ghulam Dastgir, Khalid Javed, Additional Commissioner and Farooq A. Nasir Additional Commissioner, Inland Revenue, RTO, Rawalpindi for Petitioner.

Hafiz Muhammad Idrees, Ch. Naeem-ul-Haq and Atif Waheed for Respondents.

Date of hearing: 12th November, 2012.

2013 P T D 914

[Lahore High Court]

Before Syed Mansoor Ali Shah and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

ISLAM UD DIN and others

I.T.R. No.4 of 2012, heard on 13th November, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122C & 133---High Court Reference---Provisional assessment of taxpayer---Retrospective effect of S. 122C of the Income Tax Ordinance, 2001---Scope---Department sought Reference to the High Court on the question "whether S. 122C of the Income Tax Ordinance, 2001 (inserted vide amendment through the Finance Act, 2010) had a retrospective effect and whether the same could be applied to tax years prior to 2011"---Held, that examination of the older S. 121(1) (a) and the newly inserted S. 122C of the Income Tax Ordinance, 2001 revealed that provisions of S. 121(1)(a) had been shifted to an independent provision, namely S. 122C of the Ordinance---Change in the new provision, was that the assessment order has been divided into two parts, that is, provisional assessment followed by a final assessment, after a period of sixty days---Section 122C therefore, provided an additional facility to the assessee/taxpayer to furnish return during the period of sixty days and if he did so, the provisional assessment came to an end---No such facility however was available to the assessee under the older S. 121(1)(a) of the Ordinance, wherein assessment was made without providing for provisional assessment or providing extra time (sixty days) to the taxpayer---Section 122C was therefore a beneficial legislation/provision, and was therefore, retrospective in its application---Reference was answered in the affirmative, accordingly.

West Punjab Province v. K.B. Amir-ud-Din and others PLD 1953 Lah. 433; Federation of Pakistan through Secretary Federal Board of Revenue, Islamabad and others v. New Ammur Industries, Lahore 2010 PTD 352; Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. and other 2009 SCMR 1279 = 2009 PTD 1392; Commissioner of Income Tax, Companies, Lahore v. Waheed Brothers (Pvt.) Ltd., Lahore 2006 PTD 2275; Honda, Shahrah-e-Faisal, Karachi and others v. R.C.I.T., Corporate Region, Karachi and others 2005 PTD 1316; Zakaria H.A. Sattar Bilwani and another v. I.A.C. of Wealth Tax, Karachi 2003 PTD 52; Messrs Monnoo Industries Ltd. v. The Commissioner of Income Tax, Central Zone, Lahore 2001 PTD 1525; Commissioner of Income Tax v. Pakistan Tobacco Company Ltd., and others 1988 PTD 66 and Rustom F. Cowasjee and 2 others v. Central Board of Revenue and 2 others 1985 PTD 529 ref.

Circular No. 2 of 2010; State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited 1997 SCMR 1244; Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Dreamland Cinema, Multan v. Commissioner of Income Tax, Lahore, PLD 1977 Lah. 292, Commissioner of Income Tax, Karachi v. Messrs B.R.R. Investment (Pvt.) Ltd. Karachi, 2011 PTD 2148 and Commissioner Income Tax, Companies-I, Karachi v. N.I.T. Limited 2010 PTD 553 rel.

Manzoor Hussain along with Khalid Javed, Additional Commissioner and Farooq A. Nasir, Additional Commissioner for Petitioner.

Hafiz Muhammad Idrees and Ch. Naeem-ul-Haq for Respondent No.1.

Date of hearing: 13th November, 2012.

2013 P T D 1030

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs AZGARD NINE LTD.

Versus

PAKISTAN through Secretary and others

Writ Petitions Nos.23393, 23394 of 2009, 27165, 27166 of 2010, 136, 3662, 11988, 15224 of 2011 and 98 of 2012, decided on 21st May, 2012.

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

----Ss. 4, 2(i), 6 & 11B---Constitution of Pakistan, Arts. 73, 78, 77 & 199---Constitutional petition---Money Bill---Scope---"Tax" and "Fee", distinction---Contributions made to the Workers' Welfare Fund by industrial undertakings were in the nature of a "fee" and not "tax"---Petitioners impugned amendments made in S. 4 of the Workers' Welfare Fund Ordinance, 1971 whereby quantum of industrial contributions to the Workers' Welfare Fund was enhanced---Contention of the petitioners was that under the prescribed scope of Money Bill under Art.73 of the Constitution, provisions of the Workers' Welfare Fund Ordinance, 1971 fell beyond the scope of Federal Finance Legislation, and such contributions had the character of a "fee" and not of a "tax" and the impugned amendments were therefore ultra vires the Constitution---Validity---"Tax" was a compulsory exaction of money by public authority for public purposes, whereas "fee" was a quid pro quo, and a recompense for services rendered---Contributions to the Fund were made by industrial undertakings, and the beneficiaries of the disbursements from the Workers' Welfare Fund were workers of such undertakings and therefore, such contributions lacked a direct quid pro quo which was considered a classic feature of a fee however still such contributions did contain a collateral recompense in which the contributor-employer's workers were the beneficiaries of disbursements from the Fund---Distinction between a tax and the fee lay primarily in the fact that a tax was levied a part of a common burden, while a fee was a payment for a special benefit or privilege---Tax was levied to raise funds for meeting the "necessary expenses" of the State, therefore, a tax was not co-related to services rendered or special benefit or privilege conferred on the taxpayer and accordingly the taxpayer was sharing/discharging his obligation under a common burden without being a beneficiary of a corresponding benefit, whereas in contrast, a fee was not part of the common burden but was payment made in lieu of a benefit, service or privilege by the payer of such fee---Workers Welfare Fund could not be applied for general requirements of the State and contributions made to it had a specified and restricted purpose and therefore the Fund was not part of a common burden and lacked such essential attribute of a "tax"---Workers' Welfare Fund was body corporate under S.11B of the Ordinance, and contributions made to it did not form part of the general revenues of the Federal Government as envisaged in Art.78(1) of the Constitution---Workers' Welfare Fund did not form part of the Federal Consolidated Fund as it had an independent statutory existence and for the same reason it did not get credited to the Public Account of the Federation---Under Art.73(2) of the Constitution, a financial charge that neither fell within the ambit of the Federal Consolidated Fund or the Public Account of the Federation, could not fall within the scope of a "Money Bill"---High Court observed that neither the Workers' Welfare Fund nor contributions made thereto bore the attributes of a "tax" nor fell within ambit of the Art.73 of the Constitution in order to be levied, modified or enhanced by a Money Bill as had happened in the present case---Impugned amendments to the Workers' Welfare Fund Ordinance, 1971 were ultra vires the Constitution and the competence of the Parliament and were accordingly set aside---Constitutional petition was allowed, in circumstances.

East Pakistan Chrome Tannery (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 2643; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Sheikh Muhammad Ismail and Co. Ltd. v. The Chief Cotton Inspector, Multan PLD 1966 SC 388 and Mathews v. Chicory Marketing Board 60 CLR 263 rel.

Messrs Saif Textile Mills Limited v. Pakistan through Secretary PLD 1998 Pesh. 15 distinguished.

(b) Constitution of Pakistan---

----Arts. 73, 77 & 78---Fiscal legislation---Money Bill---Interpretation and Scope---"Tax" and "Fee", distinction---"Tax" was a compulsory exaction of money by a public authority for public purposes, whereas a "fee" was a quid pro quo, and a recompense for services rendered---Distinction between a tax and the fee lay primarily in the fact that a tax was levied as a part of a common burden, while a fee was a payment for a special benefit or privilege---"Tax" was levied to raise funds for meeting the "necessary expenses" of the State, therefore, a "tax" was not co-related to services rendered or special benefit or privilege conferred on the taxpayer and accordingly the taxpayer was sharing/discharging his obligation under a common burden without being a beneficiary of a corresponding benefit, whereas in contrast, a fee was not part of the common burden but was payment made in lieu of a benefit, service or privilege by the payer of such fee---Under Art.73(2) of the Constitution, a financial charge that neither fell within the ambit of the Federal Consolidated Fund or the Public Account of the Federation, could not fall within the scope of a "Money Bill".

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

Dr. Muhammad Farogh Naseem assisted by Munir-uz-Zaman and Wasif Majeed for Petitioners.

Imtiaz Rasheed Siddiqui assisted by Messrs Sehriyar Kasuri and Asif-ur-Rehman for Petitioners in connected petitions.

Muhammad Arshad and Muhammad Waseem Ch. for Petitioners in connected petitions.

Muhammad Naseem Kashmiri, D.A.-G.

Syed Sajjad Haider Rizvi for Respondents Nos. 3 to 7.

Nemo for Respondent No.8.

2013 P T D 1114

[Lahore High Court]

Before Muhammad Khalid Mehmood Khan and Muhammad Ameer Bhatti, JJ

CHIEF COMMISSIONER INCOME TAX, LAHORE and 2 others

Versus

WASEEM YAQOOB

Intra Court Appeal No.569 in Writ Petition No.18046 of 2012, heard on 19th December, 2012.

(a) Constitution of Pakistan---

----Art.199---Constitutional petition---Factum of petitioners minority based on certificate issued by NADRA seriously disputed by respondent---Validity---Fact of minority could not be ascertained on basis of a single document i.e. such certificate---Recording of evidence would be required for ascertaining such minority, which exercise could not be done in constitutional jurisdiction in circumstances.

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

----Ss.127 & 138---Income Tax Rules, 2002, R. 186---Constitution of Pakistan, Art.199---Law Reforms Ordinance (XII of 1972), S.3---Intra Court appeal---Maintainability---Issuance of notice to petitioner under S.138(1) of Income Tax Ordinance, 2001 directing him to pay income tax and warrants of his detention under R.186 of Income Tax Rules, 2002---Order of High Court accepting constitutional petition challenged in Intra Court Appeal---Maintainability---No appeal was provided under S.127 of Income Tax Ordinance, 2001 against order passed by Commissioner under S.138 thereof---Intra Court appeal was maintainable.

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

----Ss.127 & 138---Income Tax Rules, 2002, R.186---Constitution of Pakistan, Arts. 10-A & 199---Law Reforms Ordinance (XII of 1972), S.3---Intra-Court appeal---Issuance of notice to respondent under S.138(1) of Income Tax Ordinance, 2001 directing him to pay income tax and warrants of his detention under R.186 of Income Tax Rules, 2002---Order of High Court accepting respondent's constitutional petition---Validity---Every citizen under Art.10-A of the Constitution had a right of fair trial and hearing---No appeal was provided under S.127 of Income Tax Ordinance, 2001 against order passed by Commissioner under S.138 thereof---Respondent in absence of right of appeal against impugned notice had to go to jail for non-payment of demanded income tax---Commissioner had held inquiry, but had not allowed respondent to produce evidence---Commissioner was legally obliged to have called respondent before passing final order against him---Appellate Bench of High Court set aside impugned judgment of single Judge of High Court and remanded case to Commissioner to decide same afresh after allowing respondent to explain his case and produce documentary evidence in support thereof.

Muhammad Abdullah v. Deputy Settlement Commissioner, Centre-I, Lahore PLD 1985 SC 107 and Mst. Karim Bakhsh and another v. Hussain Bakhsh and another PLD 1984 SC 344 ref.

Asjad Saeed for Appellant.

Shafqat Mehmood Chohan for Respondent.

Date of hearing: 19th December, 2012.

2013 P T D 1251

[Lahore High Court]

Before Ijaz Ahmad and Ibad-ur-Rehman Lodhi, JJ

Messrs RAZA SERVICES through Attorney

Versus

COLLECTOR OF CUSTOMS (APPEALS), MULTAN and 3 others

Customs Reference No.10 of 2012, decided on 9th April, 2013.

Customs Act (IV of 1969)---

----S.194---Dismissal of appeal by Appellate Tribunal without stating its own reasons in support thereof---Validity---High Court remanded case to Tribunal for its decision afresh after hearing parties and recording reasons for its findings.

2006 PTD 2237; 2005 CLD 159 = 2005 PTD 449 ref.

Mian Abdul Ghaffar for Petitioner.

Ahmad Raza for Respondents.

2013 P T D 1274

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

Messrs ITTEFAQ RICE MILLS

Versus

FEDERATION OF PAKISTAN and others

I.C.A. No.116 of 2013, heard on 23rd May, 2013.

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

----S.214C---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VIII of 2005) S. 42B---Law Reforms Ordinance (XII of 1972) S.3---Intra-court appeal---Audit of taxpayer---Selection for audit---Risk parameters, interpretation of---"Parametric balloting" and "random balloting", distinction and scope---Petitioner/taxpayer impugned notice for selection for audit issued under S. 214C of the Income Tax Ordinance, 2001 inter alia on the grounds that said selection was illegal as until "high risk" cases were identified through an open and transparent manner, no parametric balloting could be held and that in order to qualify as a "high risk case", all risk parameters must apply to a taxpayer, which was not the case of the petitioner---Validity---Statutory obligation of the Federal Board of Revenue (FBR) regarding selection of cases for audit under S. 214C of the Income Tax Ordinance, 2001, S. 72B of the Sales Tax, 1990 and S. 42B of the Federal Excise Act, 2005 was to conduct a ballot which may be 'random' or 'parametric'---Law clearly provided for selection of "persons" or "classes of persons" for audit and such selection of "persons" could conveniently be done through 'random balloting' while selection of 'classes of persons' could only be done through parametric balloting and it was axiomatic that in a parametric audit, the application of risk parameters to taxpayers would automatically segregate a group of taxpayers---Such parametric group of taxpayers was put through computer balloting (also parametric) and a limited number from amongst such taxpayers were selected for audit as per institutional capacity and requirement---Nature and character of the 'parametric group' would depend on the mode and manner of application of the risk parameters to the taxpayers and such architecture and design of risk analysis forming part of the audit strategy or policy, for a particular taxpayer, was the sole prerogative of the FBR---Courts may judicially review the audit policy announced by the FBR in order to satisfy itself regarding its fairness, openness and transparency besides ensuring that the audit policy has been fairly applied to the taxpayers across the board and the FBR had to show that the risk parameters have been duly framed by FBR and have been publically advertised for the sake of taxpayers' convenience along with the risk strategy adopted by the FBR---Perusal of risk parameters, applicable to the present case, showed that every parameter was independent and self-contained, and the contention that unless a basket of risk parameters was attracted to a case, the case did not qualify as a "high risk case", was erroneous---Number of facts determined risk, and therefore, even a single risk parameter could identify a "high risk case"---Expression "parameters are aimed at auditing high risk cases" used in the FBR Minutes, did not mean that application of all parameters would constitute high risk cases but meant that even a single risk parameter, from amongst the framed, could identify high risk cases---No illegality, therefore, existed in the selection of the petitioner for audit---Intra-court appeal was dismissed, in circumstances.

Premier Industrial Chemical Manufacturing Co. v. Commissioner Inland Revenue and others 2013 PTD 398 rel.

(b) Federal Board of Revenue Act ( IV of 2007)---

----S. 4---Income Tax Ordinance (XLIX of 2001) S.214C---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VIII of 2005) S. 42---Audit of taxpayers---Selection of audit---Power functions and duties of the Federal Board of Revenue in relation to selection of taxpayers for audit and formulation of an "Audit Policy"---Scope---Audit Policy was a serious matter and affected a large number of taxpayers in the country and therefore, such a policy must be open, lucid, transparent and self-explanatory---High Court observed that it was odd that the Audit Policy for the tax year 2011 was in the shape of Minutes of Meetings of the Federal Board of Revenue's Board-in-Council and had not been formalized into a policy documents and uploaded as such on the FBR website---High Court directed that in the future the FBR would ensure that the Audit Policy carrying risk parameters, the mode and manner of segregation through risk analysis for the purposes of parametric balloting was clearly laid out in a policy document as the same would help to avoid litigation and would also allay the apprehensions of the taxpayers which stemmed from lack of openness and clarity.

Malik Mumtaz Hussain Khokhar for Appellant.

Asif Rasool, Additional Commissioner, Inland Revenue for Respondents.

Date of hearing: 23rd May, 2013.

2013 P T D 1304

[Lahore High Court]

Before Abid Aziz Sheikh, J

BASIT CAMPUS DEVELOPMENT AND MANAGEMENT COMPANY through AUTHORIZED, REPRESENTATIVE

Versus

GOVERNMENT OF THE PUNJAB through Secretary, Excise and Taxation Department, Punjab, Lahore and another

Writ Petition No.16354 of 2010, decided on 17th April, 2013.

(a) Punjab Finance Act (XV of 1977)---

----S. 3 & Second Sched.---West Pakistan General Clauses Act (VI of 1956) S.3(47)---Constitution of Pakistan, Arts. 163, 260 & 199---Constitutional petition---Tax on persons engaged in professions, trades, callings or employments---Provincial taxes in respect of professions, etc.---Petitioner company impugned notice for assessment of professional tax under S. 3 of the Punjab Finance Act, 1977 on the ground that same was ultra vires the Constitution as the Federation had the exclusive jurisdiction to levy tax on corporations and that the petitioner company did not fall within the scope of the Second Schedule to the Punjab Finance Act, 1977----Validity---Only restriction that existed on the competence of the Provincial Legislature to impose a professional tax was that the rate of such tax could not exceed the limit that may be fixed by an Act of Parliament---Petitioner, in the present case, was a company registered under the Companies Ordinance, 1984 and fell under Second Schedule of the Punjab Finance Act, 1977---Company was to be considered to be a juristic and artificial person created under the Companies Ordinance, 1984 and was possessed with certain legal rights and charged with certain legal duties---Word "person" had been defined in Art. 260 of the Constitution so as to include any body politic or corporate and the same definition was used in S. 3(47) of the West Pakistan General Clauses Act, 1956---No bar therefore existed against the Provincial Government to recover the professional tax from the petitioner company---Constitutional 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; Pakistan Steel Mills Corporation (Private) Limited, through Incharge Law v. Province of Punjab through Chief Secretary and others PLD 2012 Lah. 103; Mir Nabi Bakhsh Khan Khoso v. Branch Manager, National Bank of Pakistan, Jhatpat (Dera Allah Yar) Branch and 3 others 2000 SCMR 1017 and Khalid Mehmood Chaudhary and others v. Government of the Punjab through Secretary, Livestock and Dairy Development (2002 SCMR 805) and Virasat Ullah v. Bashir Ahmad, Settlement Commissioner (Industries) and another 1969 SCMR 154 rel.

(b) Constitution of Pakistan---

----Art. 163---Punjab Finance Act (XV of 1977), S.3 & Second Schedule---Provincial taxes in respect of professions, etc---Imposition of such tax on companies---Scope---Companies could not be considered as falling outside the purview of the provincial law in matter of imposition of professional taxes----Article 163 of the Constitution clearly postulated that professional taxes shall not be considered as a tax on income and it was with the view to remove the doubts that all Constitutional dispensations had made it clear that a provincial law imposing professional taxes would not be regarded as imposing a tax on income.

(c) Punjab Finance Act (XV of 1977)---

----S. 3----Punjab Professions and Trade Taxes Rules, 1977 R. 3---Constitution of Pakistan, Art. 199---Tax on persons engaged in professions, trades, callings or employments---Constitutional petition impugning notice of assessment of professional tax under section 3 of the Punjab Finance Act, 1977---Maintainability---Alternate remedy---Petitioner had an alternate remedy by way of appeal under Rule 3 of the Punjab Professions and Trade Taxes Rules, 1977---Constitutional petition was not maintainable.

Suqrat Basit for Petitioner.

Muhammad Arif Yaqoob Khan, A.A.-G. and Akhlaque Rasheed, Excise and Taxation Officer.

2013 P T D 1332

[Lahore High Court]

Before Ijaz ul Ahsan, J

Messrs BILAL ENTERPRISES through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 4 others

Writ Petition No.18406 of 2011, decided on 12th June, 2012.

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

----Ss. 25, 25-A & 25-D---Constitution of Pakistan, Art. 199---Constitutional petition---Imported goods alleged to have been evaluated without following provisions of S. 25 of Customs Act, 1969---Release of goods by interim order of High Court on basis of its declared value---Reference of original evaluation ruling to Director Valuation by parties for its revision---Issuance of revised evaluation rates by Director Valuation for calculating customs duties---Validity---Revised evaluation ruling would be deemed to have taken effect from date when original ruling was given---Petitioner could not be burdened to pay taxes at excessive rates fixed in original ruling having been found to be erroneous by department itself---Revised ruling was based upon all relevant factors specified in S. 25 of Customs Act, 1969 and petitioner was entitled to take benefit thereof---High Court directed the authorities to finalize provisional assessment of petitioner on basis of revised evaluation ruling.

(b) Taxation---

----Benefit of ambiguity or error, if any, relating to status or interpretation of ruling must go to tax payer.

Mian Abdul Ghaffar for Applicant.

Sarfraz Ahmad Cheema for Respondent.

2013 P T D 1536

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

CARETEX

Versus

COLLECTOR SALES TAX AND FEDERAL EXCISE and others

S.T.R. No.1 of 2009, decided on 31st May, 2013.

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

----S. 36(1)---Interpretation of S.36(1), Sales Tax Act, 1990---Recovery of tax not levied or short-levied or erroneously refunded---Issuing of show-cause notice to taxpayer under S. 36(1) of the Sales Tax Act, 1990---Essentials---Phrase "where by reason of" used in S. 36(1) of the Sales Tax Act, 1990 mandated that the tax department could not begin to assume jurisdiction under S. 36 of the Sales Tax Act, 1990 and issue show case notice to taxpayer until and unless the department was seized of sufficient evidence "by reason of" which collusion, deliberate act, inadvertence, error, or misconstruction was established---Taxpayer must have had a pre-mediated or pre-arranged plan to evade tax and the evidence must show and establish a calculated stratagem or a game plan behind the transaction tailored for the specific purpose of evading tax---"Collusion" required that there must be a more than one person scheming to defraud or there must be a conspiracy of a fraudulent act resulting in evasion of tax and on the whole unless there was a deliberate design or an agreement between the persons to defraud the tax department and the same was clearly and preciously laid out in the show cause notice---Mere mentioning of S.36(1) or mentioning the words "deliberate act" or "collusion" in the show cause notice would not vest the tax department with the jurisdiction to invoke S.36(1) of the Sales Tax Act, 1990---Legal enforceability and jurisdictional validity of a show cause notice vested from its content, that was, the facts supported by tangible evidence referred to in the show cause notice and not from the cosmetic showcasing of statutory provisions or from the use of statutory key words like "collusion" or deliberate act in the show cause notice.

D.G. Khan Cement Company Ltd., Lahore v. Collector of Customs, Sales Tax and Central Excise, Multan and 2 others 2003 PTD 1797 ref.

Assistant Collector Customs, Dry Port, Peshawar and others v. Messrs Khyber Electric Lamps MFG Co. Ltd., Peshawar 2001 SCMR 838; Caltex Oil (Pakistan) Ltd. v. Collector, Central Excise and Sales Tax and others 2005 PTD 480; Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others 2007 PTD 1804; D.G. Khan Cement Company Limited, Lahore v. The Collector of Customs, Sales Tax and Central Excise, Multan and 2 others 2003 PTD 1797; Messrs Inam Packages, Lahore v. Appellate Tribunal Customs Central Excise and Sales Tax, Custom House, Lahore and 2 others 2007 PTD 2265; Osman Abdul Karim Bawaney v. The Collector of Customs, Chittagong and others PLD 1962 Dacca 162 and Collector of Central Excise, Hyderabad v. Messrs Chemphar Drugs and Liniments, Hyderabad AIR 1989 SC 832 rel.

(b) Show-cause notice---

----Show-cause notice issued in relation to taxation matters---Essential ingredients and prerequisites---Show-cause notice, was a foundational document, which was to comprehensively describe the case made out against the taxpayer by making reference to the evidence collected in support of the same and was a narration of facts in the show-case notice along with the supporting evidence which determined the offence attracted to a particular case---Show-cause notice was not a casual correspondence or a tool or license to commence a roving inquiry in to the affairs of the taxpayer based on assumptions and speculations but was a fundamental document that carried definitive legal and factual position of the department against the taxpayer---Legal enforceability and jurisdictional validity of a show cause notice vested from its content, that was, the facts supported by tangible evidence referred to in the show cause notice and not from the cosmetic showcasing of statutory provisions or from the use of statutory key words in the show cause notice.

(c) Words and phrases----

----"Delibrate"---Meaning of.

Black's Law Dictionary Sixth Edition (at page 426) and The Law Lexicon of British India by P. Ramanatha Aiyar (at page 310) rel.

(d) Words and phrases---

----"Collusion"---Meaning of.

www.freedictinoary.com. Sixth Edition (at page 264) and Sixth Edition (at page 759) rel.

(e) Words and Phrases---

----"Inadvertence"---Meaning of.

The Law Lexicon of British India by P. Ramanatha Aiyar (at page 570) and Black's Law Dictionary Sixth Edition (at page 542) rel.

(f) Words and Phrases---

----"Error"---Meaning of.

Black's Law Dictionary Sixth Edition (at page 542) rel.

(g) Words and phrases---

----"Misconstruction---Meaning of.

www.freedictionary.com rel.

Mian Abdul Basit for Petitioner.

Ahmed Raza for Respondents.

Date of hearing: 31st May, 2013.

2013 P T D 1548

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

COMMISSIONER INLAND REVENUE, MULTAN

Versus

Messrs ALLAH WASAYA TEXTILE AND FINISHING MILLS LTD.

T.Rs. Nos.22 and 23 of 2012, decided on 30th May, 2013.

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

----Ss. 2(ha) & 4(4)---General Clauses Act (X of 1897) S. 8---Income Tax Ordinance (XLIX of 2001) Ss. 207, 122 & 133---High Court Reference---Construction of references to repealed enactments---"Taxation Officer," meaning of---Term "Taxation Officer" to be read as "Officer Inland Revenue" for purposes of Workers' Welfare Fund Ordinance, 1971---Taxpayer did not include its liability under S.4(4) of the Workers' Welfare Fund Ordinance , 1971 after which under the amended assessment order taxpayer was held liable to pay an amount under S.4(4) of the Workers' Welfare Fund Ordinance, 1971---Said addition was deleted by Appellate Tribunal on the ground that under S.4(4) Deputy Commissioner Inland Revenue had no jurisdiction under the Workers' Welfare Ordinance, 1971 as S. 4(4) referred to "Taxation Officer" whereas in the nomenclature of the amended Income Tax Ordinance, 2001,the word "Taxation Officer" was substituted by "Officer Inland Revenue", which did not find mention in S. 4(4) the Workers' Welfare Fund Ordinance, 2001---Held that, under S. 8 of the General Clause Act, 1897, it was clear that after the repeal of the Income Tax Ordinance, 1979 and enactment of Income Tax Ordinance, 2001, reference in any other enactment of the repealed Ordinance or its provisions would be read as the new Ordinance, which was the Income Tax Ordinance, 2001 along with the new provisions---Term "Taxation Officer", therefore, for all practical purposes, would be read as the "Officer Inland Revenue", as appearing in the Income Tax Ordinance, 2001---Repeal of the Income Tax Ordinance, 1979 therefore, did not absolve the taxpayer of his liability simply on the pretext that appropriate amendment was not made in the nomenclature of the "Taxation officer" in S.2(ha) of the Workers' Welfare Fund Ordinance, 1971---Reference was answered in negative.

Haji Nasim-ur-Rehman v. Commissioner of Income Tax/Wealth Tax and others 2009 PTD 164 distinguished.

Rana Muhammad Ashraf for Petitioner.

Sh. Zafar-ul-Islam, Niaz Ahmad Khan and Tanveer Ahmad for Respondent.

Date of hearing: 30th May, 2013.

2013 P T D 1578

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

COMMISSIONER INLAND REVENUE

Versus

Ch. MUHAMMAD AKRAM

T.R. No.45 of 2010, decided on 30th May, 2013.

Income Tax Ordinance (XLIX of 2001)---

---Ss.122 (4)(a) & 122(4)(b)---Amendment in assessment---Limitation---Term "later of", as used in S.122(4)(b) of the Income Tax Ordinance, 2001---Connotation and scope---Taxpayer/assessee filed tax return on 29-2-2007, after which taxpayer filed a revised return under S. 114 of the Income Tax Ordinance, 2001 on 26-4-2008, whereby original assessment order stood amended---Said assessment order was subsequently further amended on 12-1-2010---Appellate Tribunal had held that the further amendment on 12-1-2010 was in violation of S.122(4)(b) of the Ordinance, which provided a period of one year for any further amendment---Department contended that S. 122(4) provided two separate and distinct timelines (five years in S. 122(4)(a) and one year in 122(4)(b)) and "later of" the two timelines was available to the Department---Validity----Language used in Ss. 122(4)(a) & 122(4)(b) was clear and unambiguous and both timelines dealt with different periods of limitation for amendment(s) in assessment orders---Only difference was that both timelines had a different reference/starting point for calculating period of limitation and in S. 122(4)(a) the period began from end of financial year in which the Commissioner had issued or had treated as having been issued the original assessment order to the taxpayer while in the period of one year in S. 122(4)(b) began from the end of the financial year in which the Commissioner had issued or had treated as having been issued amended assessment order---Section 122(4)(a) did not imply that only original assessment order could be amended for the first time within a period of five years and in fact it referred to "original assessment order" as a reference point for commencement of the period of limitation---An original assessment could be amended any number of times within a period of five years from the end of the financial year in which the Commissioner had issued or treated as having issued the original assessment order---In S. 122(4)(b) the start of the timeline of one year was from the end of the financial year in which the Commissioner had issued or was treated as having issued the amended assessment order---Department had the option to invoke the available timeline, hence the term "later of" was used in S. 122(4)(b) of the Ordinance; which indicated that both timelines were available and the Department had the option to place reliance on the timeline which expired later in time---Original assessment order in the present case was dated 29-2-2007, therefore, period of five years under S. 122(4)(a) of the Ordinance would expire on 29-2-2013, and therefore, the amendment brought on 12-1-2012 fell within the timeline.

Ch. Muhammad Asghar Saroha and Asif Rasool, Additional Commissioner Inland Revenue, Multan for Petitioner.

Messrs Sh. Zafar-ul-Islam, Niaz Ahmad Khan and Tanveer Ahmad for Respondent.

Date of hearing: 30th May, 2013.

2013 P T D 1582

[Lahore High Court]

Before Shezada Mazhar, J

PAKISTAN READYMADE GARMENTSMANUFACTURERS AND EXPORTERS ASSOCIATION ("PRGMEA") through Chairman

Versus

GOVERNMENT OF PAKISTAN through Ministry of Finance and another

Writ Petition No.9839 of 2013, heard on 20th May, 2013.

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

----Ss. 4 & 3---S.R.O. No. 14(1)/2013 dated 28-2-2013---General Clauses Act (X of 1897) S. 21---Constitution of Pakistan, Art. 199---Constitutional petition---Zero-rating---Competency of Federal Government to remove goods from list of zero-rated goods vide notification---Petitioners impugned the issuance of S.R.O. No.14(1)/2013 dated 28-2-2013 whereby previous zero-rating on textile products was enhanced to two percent---Contention of the petitioners was that S.4 of the Sales Tax Act, 1990 began with a non-obstante clause which had an overriding effect on the provisions of S. 3 of the Sales Tax Act, 1990, and therefore, the charging S. 3 of the Act was not applicable to the goods notified under S. 4(c) of the Act---On this basis, the petitioners submitted that the Federal Government had the power to include goods in the ambit of S. 4 of the Sales Tax Act, 1990 but did not have the power to remove the same once they were added to the list of goods that were zero-rated---Validity---Held, before the S.R.O. No. 14(1)/2013 dated 28-2-2013 was issued, a number of S. R. Os. had been issued whereby not only import and supply. of goods mentioned in Tables of said S. R. Os. were zero rated but also reduced rate of sales tax was introduced on the import and supply of goods; and the petitioners kept"enjoying said rates till the issuance of the impugned S.R.O.---Although S.R.O. No. 14(1)/2013 dated 28-2-2013 had not been introduced only under S. 4(c) of the Sales Tax Act, 1990, however, even if it were, then by virtue of S. 21 of the General Clauses Act, 1897 the Federal Government had the power to amend, vary or rescind orders, rules or bye-laws---Bare reading of S. 4(c) of the Sales Tax Act, 1990 revealed that rates mentioned in S. 3 of the Sales Tax Act, 1990 would not be applicable to goods mentioned in the notification issued by the Federal Government---Through the impugned S. R. O., only the earlier S.R.O. had introduced the rate of two percent instead of zero percent on the import and supply of goods mentioned in the Table given in the said S.R.O.s---Imp[gned S.R.O. had neither infringed or withdrawn any vested right of the petitioner and was to be applied prospectively and not retrospectively---Impugned S.R.O. was not only issued under S.4(c) of the Sales Tax Act, 1990 instead it was issued under Ss.4(c), 3(2)(b), 3(6), 8(1)(b) and S. 71 of the Sales Tax Act, 1990---S.R.O. No. 14(1)/2013 dated 28-2-2013 was therefore not ultra vices to the Sales Tax Act,,, 1990---Constitutional petition was dismissed in circumstances.

Messrs Tradecom Pakistan v. Deputy Collector Customs CFS Dry Port and another 2008 PTD 1482; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan 1997 PTD 1555; The Engineer -in-Chief Branch through Ministry of Defence Rawalpindi and another v. Jalaluddin PLD 1992 SC 207; Messrs Fazal Din and Sons (Pvt.) Ltd. v. Federal Board of Revenue Islamabad and others 2009 SCMR 973; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 and Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---"Aggrieved . person "---Scope---Under Art.199 of the Constitution, a Constitutional petition could only be filed by an aggrieved party---"Party" meant one who was competent to maintain an action---Constitutional petition could be filed a person, a number of persons, a corporate body or firm---Non-registered association had no locus standi to file a Constitutional petition, Barrister Mian Belal for Petitioner. Muhammad Yaha Johar for Respondents. Date of haring: 20th May, 2013.

2013 P T D 1720

[Lahore High Court]

Before Umar Ata Bandial, C.J.

Messrs LAND MARK

Versus

INCOME TAX APPELLATE TRIBUNAL and others

Writ Petition No.19928 of 2001, decided on 27th February, 2013.

Wealth Tax Act (XV of 1963)---

----S.2(1)(16)---Constitution of Pakistan, Art.199---Constitutional petition---"Net wealth"; computation of---Non-payability of wealth tax on debts which were secured on, or which had been incurred in relation to, any asset in respect of which wealth tax was payable---"Tax chargeable" and "tax payable", distinction---Scope---Petitioner had impugned order of Tribunal whereby wealth tax was assessed as payable on debts which according to the petitioner were liable to be deducted as they were acquired against taxable assets, and it was immaterial if such assets were subsequently sold on account of exigency of business and such sale of assets did not convert the loan into one which was created for non-taxable assets---Validity---Language of S.2(1)(16)(ii) of the Wealth Tax Act, 1963 used the expression "payable" rather than "chargeable", and the non-payability of wealth tax was connected with an asset which was, for one reason or the other, exempt or relieved from such tax payment and also; tax ceased to be payable on an asset that had been disposed of---Debts of an assessee that were eligible for deduction from the value of the assets were necessarily those regarding/pertaining to existing assets that were not exempt from tax and where an asset did not exist there could be no ground to treat the same as a chargeable asset and therefore the debt procuring such asset could not be deducted from the value of assets---Requirement of non-payability of tax was therefore met both in case of exemption from wealth tax as well as the non-existence of an asset forming the consideration or security for debt sought to be deducted---Impugned order of the Tribunal was legally correct---Constitutional petition was dismissed, in circumstances.

Tariq Rasheed for Petitioner.

Muhammad Ilyas Khan for Respondent.

2013 P T D 1760

[Lahore High Court]

Before Umar Ata Bandial, C.J.

JAMAL PIPE INDUSTRIES (PVT.) LTD. and others

Versus

SUPERINTENDENT INTELLIGENCE and others

Writ Petition No.6461 of 2005, heard on 19th November, 2012.

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

----Ss. 40 & 40-A---Constitution of Pakistan, Art. 199---Constitutional petition---Search and seizure conducted by Sales Tax Authorities---Search without a warrant---Contention of the petitioner was that the Sales Tax Authorities conducted a raid and search without a warrant, on its premises, and had seized private record of the petitioner without a warrant, in contravention of the provisions of Ss. 40A & 40 of the Sales Tax Act, 1990---Validity---Search conducted by the sales tax authorities involved a surprise and a certain degree of coercion in the face of some resistance by an assessee by the way of concealment or refusal---Alleged search team, in the present case, comprised of only two persons and such contingent was not large enough to constitute a raiding party which should include persons stationed outside the premises who would prevent anything from being taken away and the statement of the Finance Manager of the assessee suggested that no force or coercion was used to obtain the private record---Sales tax officers, it appears, on the inability of the assessee to provide the sales tax record, took in possession the private record that was made available---Nothing was available to suggest that such private record was kept in concealment to avoid detection and therefore search and seizure conducted by Sales Tax Authorities was not contrary to provisions of Ss. 40A & 40 of the Sales Tax Act, 1990---Constitutional petition was dismissed in circumstances.

Moossa v. The State 1991 PCr.LJ 361 and Muzammil Shah v. The State 1991 MLD 1944 distinguished.

(b) Taxation---

----Investigations and offences related to Tax fraud or tax evasion---High Court observed that in a case involving tax default or tax fraud, the examination of the record could involve its analysis in a manner quite distinct from a police investigation of a routine offence committed under the Pakistan Penal Code---Element of continuity and expedition in the completion of prosecution stage as a due process safeguard must be observed in the tax investigations---Such point however was a matter for the Trial Court to determine and it was the Trial Court that could examine whether the investigative steps or evidence collected during investigation were either fabricated or manipulated or otherwise defective---In every criminal prosecution, whether it was by tax authorities or police authorities, criminal jurisprudence required that material investigations be completed expeditiously as delay caused pre-judice to an accused apart from permitting incriminating evidence to be either to be destroyed or manufactured and such was a question for the Trial Court to consider at the time of the trial.

Kh. Saeed-uz-Zafar for Petitioner.

Ch. Muhammad Khalid for Respondents.

Date of hearing: 19th November, 2012.

2013 P T D 1780

[Lahore High Court]

Before Shezada Mazhar, J

Messrs STYLO SHOES through Managing Partner and another

Versus

DEPUTY DIRECTOR and others

Writ Petitions Nos. 11727 & 11728 of 2013, heard on 27th May, 2013.

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

----Ss. 40 & 38---Constitution of Pakistan Art. 199---Constitutional petition---Access to premises of registered person---Search under warrant---Scope---Petitioner impugned search conducted by Department on the ground that Department had obtained warrant of the petitioner's premises on basis of false information and no inquiry or default could be attributed to the petitioner----Search conducted on premises of another company was also impugned---Validity---Under S. 38 of the Sales Tax Act, 1990, an authorized officer had free access to the premises of a registered person whereas under S. 40 of the Act an officer who had "reason to believe" that any thing or document would be useful for or relevant to any proceedings then he may obtain search warrant from Magistrate and carry out search of "any place"---No requirement of notice under S. 38 of the Act before proceeding under S.40 of the Sales Tax Act, 1990, existed---Department, in the present case, was conducting an enquiry under S. 38 of the Sales Tax Act, 1990 for which the concerned officer obtained the relevant order from the competent authorities and therefore, on basis of credible information (declaration of petitioner company on its website) the concerned officer obtained search warrant from concerned Magistrate under S. 40 of the Act and carried out search strictly in accordance with law---Further search was conducted on basis of intelligence, of the premises of the other company, and management of both the petitioner company and said other company was the same, and one was manu-facturing exclusively for the other---Term "any place" used in S.40 of the Act included any third party's place and was not restricted to the business premises of the registered person or place of the registered person against whom any enquiry was pending---No illegality existed in the impugned actions of the Department---Constitutional petition was dismissed, in circumstances.

Federation of Pakistan and others v. Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Z & J Hygienic Products (Pvt.) Ltd. v. Collector Sales Tax 2011 PTD 697; Chairman, Central Board of Revenue and others v. Haq Cotton Mills (Pvt.) Ltd., Burewala and others 2007 SCMR 1034 = 2007 PTD 1351; 2004 PTD 1339 and Collector of S.T. & C.E. (Enforcement) and another v. Mega Tech (Pvt.) Ltd. 2005 SCMR 1166 = 2005 PTD 1933 distinguished.

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

----S. 40---Interpretation of S. 40, Sales Tax Act, 1990---Search under warrant----Under S. 40 of the Sales Tax Act, 1990 where an officer of the Department had "reason to believe" that anything or document would be useful for or relevant to any proceedings he, may obtain warrant from Magistrate and carry out search of "any place"----"Any place" included any third party's place and was not restricted to the business premises of the registered person or place of the registered person against whom any enquiry was pending.

Naved A. Andrabi for Petitioner.

Miss Kausar Parveen with Saad Waqas, Deputy Director Intelligence and Investigation Inland Revenue for Respondents.

Date of hearing: 27th May, 2013.

2013 P T D 1883

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs NISHAT DAIRY (PVT.) LTD. through Company Secretary

Versus

COMMISSIONER INLAND REVENUE and 4 others

Writ Petition No.31925 of 2012, heard on 25th March, 2013.

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

----Ss. 65D, 159(1), 53, 148 & 122---Constitution of Pakistan, Arts. 25 & 199---Constitutional petition---Tax credit for newly established industrial undertaking---Corporate dairy farming---Issuance of Exemption Certificate for advance tax payable at import stage in cases of undertakings having hundred percent tax credit under S.65D of the Income Tax Ordinance---"Tax Exemption" and "Tax Credit" were two sides of the same equation---Petitioner was a newly established industrial undertaking, and the benefit of a hundred percent tax credit was available to the petitioner under S. 65D of the Income Tax Ordinance, 2001---Petitioner contended that it was entitled to an "Exemption Certificate" under S. 159(1) of the Ordinance, against the advance income tax charged from the petitioner under S. 148(1) of the Income Tax Ordinance, 2001 at the import stage as it was importing cattle feed etc---Contention of the Department was inter alia that "tax credit" was not equivalent to "tax exemption" under S. 53 of the Ordinance, and that the petitioner had to pay the advance tax at the outset and thereafter may apply for a refund and that tax credit available to the petitioner related to income arising out of said industrial undertaking and did not extend to taxable income arising out of other sources---Held, that "Tax Credit" and "Tax Exemption", worked on opposite sides of the same equation, and were two sides of the same coin, at least when it came to applicability of S. 159(1) of the Income Tax Ordinance, 2001---Object, purpose and scope of S. 159(1) of the Ordinance was that in case a taxpayer was exempt from tax or enjoyed a low rate tax on taxable income, the taxpayer may not be unnecessarily burdened to pay advance tax or be subjected to deduction of tax at source during currency of said tax year when the tax payer was not likely to pay tax at the end of the tax year---Section 65D of the Income Tax Ordinance, 2001 provided incentive of tax credit to newly established industrial undertakings including corporate farming---Exercise of charging advance tax at the import stage appeared to be unnecessary as the petitioner enjoyed hundred (100) percent tax credit against its tax liability arising from concerned industrial undertaking---Wisdom behind S. 159 was to avoid burdening the tax payer and the tax administration with calculations, refunds and adjustment of amounts, which in the end were not required to be credited to the State exchequer---Section 159 of the Ordinance did not totally absolve the taxpayer of its tax liability which was to be finally assessed at the end of the tax year---Relief under S. 159 was at the initial stage and was based on the assumption that the amount of tax covered under the "Exemption Certificate" was not payable by the taxpayer at the end of the tax year however, nothing was final till the assessment took place at the end of the year and even thereafter the department enjoyed the power to amend the assessment order under S. 122 of the Ordinance and take penal action if a case of evasion of tax was made out---Word "exempt" used in S. 159 was to be given its literal, generic meaning, which was "to release, discharge, waive relieve from liability" or "if somebody is exempt from something, they are not affected by it, do not have to do it, pay it" and said meaning of the word "exempt" met the purpose of S. 159 and created the legislative space to easily accommodate both tax exemption and tax credit into its fold.---Phrase "exempt from tax" used in S. 159(1)(a) of the Ordinance not only took under its fold "tax exemption" under the Ordinance but also "tax credit" under the Ordinance----Tax exemption could be absolute or partial, such is the case with tax credit and can be easily verified by the Commissioner before granting the Exemption Certificate---In case of the taxpayer drawing income from other sources other than from the income arising from the newly established industrial undertaking, the said tax shall be duly paid by the taxpayer at the end of the income year-----In case of any error or miscalculation or if "Exemption Certificate" was wrongly issued beyond the limit of tax credit available to the taxpayer, the matter could be rectified under S. 122 of the Ordinance, hence contention of the department that the issuance of Exemption Certificate would impinge upon the tax payable by the taxpayer from the other sources was unfounded and premature----Furthermore, if Exemption Certificate was allowed to be issued in cases of tax exemption but declined in cases of tax credit, when both facilities exempted the taxpayer from tax under the Income Tax Ordinance, 2001, such application of S. 159(1) of the Ordinance would amount to ex facie discrimination and would offend Art. 25 of the Constitution---Petitioner was entitled to an "Exemption Certificate" under S. 159 of the Income Tax Ordinance, 2001 subject to the satisfaction of the Commissioner concerned---High Court directed the petitioner to approach the concerned Commissioner with a written request for issuance of the "Exemption Certificate" which was to be issued to the petitioner in accordance with law after satisfaction of the Commissioner concerned in terms of S. 159 of the Ordinance---Constitutional petition was allowed, accordingly.

International Directory of Finance Economist-4th Edition. P-261; Black's Law Dictionary Seventh Edition. P/1473; Barron's Financial Guides - Seventh Edition. P-711; www.investopedia.com http://www.investopedia.com; Reducations, Rebates and Credits (Taxpayer's Facilitation Guide) Brochure-IR-IT-03; Purposive Interpretation of Statutes - from The Judge in a Democracy - Aharon Barak. P-136; Black's Law Dictionary, Sixth Edition. P-571 and Oxford Advanced Learner's Dictionary Eight Edition. P-529 rel.

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

----Ss.65-D, 53 & 159---"Tax credit" & "Tax exemption", meaning of---Distinction between "tax credit" and "tax exemption"---Scope---"Tax Credit" meant "an amount of tax deemed to have been paid that may be offset against a tax liability or reclaimed by the taxpayer if they have no liability" and was an "amount subtracted directly from one's total tax liability, dollar for dollar, as opposed to deduction from gross income" and was the "direct dollar for-dollar reduction in tax liability"; for example, in case of a "tax credit", a taxpayer owing 10,000 dollars in tax liability would owe 9000 dollars if he took advantage of a 1000 dollar tax credit---High Court explained the difference between "tax credit" and "tax exemption" in the terms i.e: "tax credit is defined as amount of money that a taxpayer was able to subtract from the amount of tax that they owe to the government, and unlike deductions and exemptions, which reduce the amount of income that is taxable, tax credits reduce the actual amount of tax owed---Quantum of income that was considered taxable depended on how much money a person or household makes, less any deductions and exemptions---Once the amount owed, based on taxable income, was determined, "tax credits" can be applied to reduce the actual percentage of that amount an individual or house must pay back---Primary difference between "tax credit" and "tax exemption" was that "tax credit" reduced the amount of tax to be paid by the taxpayer, while "tax exemption" reduced the amount of annual income that can be taxed---While a "tax credit" reduced the payability of tax due, a "tax exemption" first reduced the quantum of total income and as a consequence, reduced the payability of tax due, both leading to the same result of reducing the tax liability of the taxpayer and both incentives and methodologies reduce and "exempt" the tax liability of the taxpayer---"Tax credit" and "tax exemption", therefore, work on opposite sides of the same equation, and were two sides of the same coin, at least when it came to applicability of S.159(1) of the Income Tax Ordinance, 2001.

International Dictionary of Finance Economist - 4th Edition P-261; Black's Law Dictionary Seventh Edition. P/1473; Barron's Financial Guides - Seventh Edition. P-711 and www.investopedia.com http://www.investopedia.com rel.

(c) Interpretation of statutes---

----Every statute had a purpose, without which it was meaningless and said purpose, or ratio legis, was made up of the objectives, the goals, the interests, the values, the policy and the function that the statute was designed to actualize---Judge must give the statute's language the meaning that best realizes its purpose.

Purposive Interpretation of Statutes - from The Judge in a Democracy - Aharon Barak. P-136 rel.

(d) Interpretation of statutes---

----Taxation---Any statutory ambivalence or ambiguity must be resolved in favour of the taxpayer.

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

----Ss.65D & 159---Interpretation---Exemption or lower rate certificate---Tax credit for newly established industrial undertakings---Important to give support legislative desire behind Ss. 65D & 159 of the Income Tax Ordinance, 2001 as said provisions extended fiscal incentives for boosting the economy and must receive a progressive interpretation advancing the Legislature's intent.

Mansoor Usman Awan and Asim Zulfiqar, Chartered Accountant A.F. Ferguson for Petitioners.

Imran Rasool for Respondents.

Date of hearing: 25th March, 2013.

2013 P T D 2005

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

MUHAMMAD NASEEM KHAN

T.R. No.108 of 2008, heard on 20th May, 2013.

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

----S. 133---Reference to High Court---Question of law, reframing and resettling of---Jurisdiction of High Court---Scope---High Court could reframe and resettle such question.

Commissioner of Income-Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570; Ch. Haq Nawaz Chohan v. Ch. Tariq Azam and 43 others 1994 CLC 1530; Commissioner of Income Tax v. Metal Forming Ltd. 2009 PTD 75 and Messrs American Express Bank Ltd. Karachi Commissioner of Income Tax, Companies-I, Karachi 2009 PTD 1791 rel.

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

----S. 156(1)---Expression "mistake apparent on record" as used in S.156(1) of Income Tax Ordinance, 1979---Scope---Error of fact or law, if having nexus with rights of parties, would not be a mistake apparent on record---Principles.

The expression "mistake apparent on record" as used in section 156(1) of the Income Tax Ordinance, 1979 means that error or mistake is so manifest and clear, which if permitted to remain on record may have material affect on the case. Whereas an error of fact or law, which has direct nexus with the question of determination of rights of parties, affecting their substantial rights or causing prejudice to their interest is not a mistake apparent on the record to be rectified under section 156 of the Income Tax Ordinance, 1979.

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

----Ss. 131, 133, 134 & 156---Reference to High Court---Order of Tribunal directing appellant to refile appeal under S. 134 of Income Tax Ordinance, 2001 instead of under S. 131 thereof---Refiling of appeal under S.131 of Income Tax Ordinance, 2001 instead of S.134 thereof---Respondent's application under S. 156 for recalling order whereby appellant was directed to refile appeal under S. 134 thereof---Acceptance of such application and dismissal of appeal by Tribunal---Validity---Tribunal could not rectify its order of refiling of appeal, which could be examined by next higher authority---Tribunal while passing impugned order had re-assessed the matter and formed an opinion different from its earlier order---Tribunal was not justified to recall its order of refiling appeal, which was not suffering from any mistake apparent on record---Impugned order was beyond scope of rectification---Tribunal was not justified to dismiss appeal for mentioning wrong provision of law, rather was obliged to decide appeal in accordance with law---High Court accepted reference application in circumstances.

Commissioner of Income Tax, Regional Tax Officer Multan v. Muhammad Siddique (Civil Petitions Nos.1109-L and 1110-L of 2010); Commissioner of Income Tax v. Asbestos Cement Industries Ltd., Karachi and others 1993 SCC 1011 and Home Service Syndicate v. Commissioner of Income Tax, 2003 PTD 1109 ref.

Commissioner of Income Tax Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director 2008 SCMR 204; Commissioner of Income Tax Karachi v. Abdul Ghani PLD 2007 SC 308; Baqar v. Muhammad Rafique and others 2003 SCMR 1401; Commissioner of Income Tax Companies II, Karachi v. Messrs National Food Laboratories 1992 SCMR 687; Sh. Muhammad Iftikhar-ul-Haq v. The Income Tax Officer Bahawalpur PLD 1966 SC 524; Pakistan River Steamers Ltd. v. Commissioner of Income Tax Dacca 1971 PTD 204; Commissioner of Income Tax Regional Tax Office, Multan v. Muhammad Siddiqui C.Ps. Nos.1109-L and 1110-L of 2010; Jane Margrete William v. Abdul Hamid Mian 1994 SCMR 1555; Pakistan Fisheries Ltd. Karachi and others v. U.B.L. PLD 1993 SC 109 and Usman Khan through Attorney v. Ayesha Naz and 2 others 2010 CLC 475 rel.

(d) Appeal (Civil)---

----Mentioning of wrong provision of law would not render appeal incompetent---Principles.

Mere mentioning of wrong provisions of law does not render the appeal non-maintainable or fatal to grant of relief to which the appellant otherwise was entitled under the law. The decision on merits is the most cherished goal of law and the Courts/Tribunals administering justice are not slaves to technicalities, where wrong mentioning of the provisions of law would be a hurdle in doing justice between the parties, particularly when one is otherwise found entitled to it under the law.

(e) Administration of justice---

----Adjudication of case should be on merits and technical knock-out is not to be encouraged.

Jameel Ahmed v. Late Saif-ud-Din through L.Rs. 1997 SCMR 260; Master Musa Khan v. Abdul Haque and others 1993 SCMR 1304 and Jane Margrete William through her General Attorney Mr. M. Nawaz Kasuri v. Abdul Hamid Mian 2004 SCMR 1555 rel.

Agha Muhammad Akmal Khan for Petitioner.

Malik Mumtaz Hussain Khokhar for Respondent.

Date of hearing: 20th May, 2013.

2013 P T D 2040

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, MULTAN

Versus

Messrs MOVE (PVT.) LTD., MULTAN

R.A. No.16-C of 2010 in T.R. No.116 of 2008, heard on 22nd May, 2013.

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

----S.133---Civil Procedure Code (V of 1908), S.117 & O.XLVII, R.1---Reference to High Court---Order in tax-reference passed by High Court---Application for review of such order---Maintainability---No provision existed in Income Tax Ordinance, 2001 empowering High Court to review its own order passed thereunder in reference---High Court while hearing reference could exercise jurisdiction under Income Tax Ordinance, 2001 but not jurisdiction conferred by C.P.C.---Income Tax Ordinance, 2001 being a special law containing complete Code in itself would exclude provisions contained in general law---Jurisdiction of High Court under S.133 of Income Tax Ordinance, 2001 being advisory in nature and not original, appellate or revisional jurisdiction, thus, provisions of O. XLVII, C.P.C. by virtue of S. 117, thereof would not be applicable---High Court dismissed review application for being not maintainable.

Asif Nawaz Fatiana v. Walayat Shah and others 2007 CLC 610; Aziz Ahmed Mughal v. Rent Controller and others 2006 CLC 1381; Messrs Shah Jewana Textile Mills Ltd., Lahore through representative v. United Bank Ltd. Through Attorneys PLD 2000 Lah. 162; Messrs Pak-Libya Holding Co. Ltd. v. Messrs Multitrade (Pvt.) Ltd. and 3 others 1988 CLC 1648; Nazir Ali M.H. Gangji v. Commissioner of Income Tax, Companies-I Karachi 1994 PTD 958; Messrs N.A. Industries Karachi v. Commissioner of Income Tax, Central Zone"A" Karachi 1993 PTD 45; Rahim Jan's case PLD 2004 SC 752; Syed Arif Raza Rizvi v. Messrs Pakistan International Air Line through Chairman/M.D. Karachi PLD 2001 SC 182; Brother Steel Mills Ltd. and others v. Mian Ilyas Miraj and 14 others PLD 1996 SC 543; Pakistan Fisheries Ltd. Karachi and others v. U.B.L. PLD 1993 SC 109; Valuegold Limited v. United Bank Ltd. PLD 1999 Kar. 1; Messrs Shafique Hanif (Pvt.) Ltd. Karachi v. Bank of Credit and Commerce International (Overseas) Ltd. Karachi PLD 1993 Kar. 107 and Collector of Sales Tax (East) Karachi v. Customs, Exicse, Sales Tax Appellate Tribunal, Karachi and another 2003 PTD 1477 rel.

(b) Review---

----Right of review being a substantive right is creation of relevant statute on subject.

Hussain Bakhsh v. Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1; Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94; S.A. Rizvi v. Pakistan Atomic Energy Commission and another 1986 SCMR 965; Muhammad Sharif through Legal Heirs and 4 others v. Sultan Hamayun and others 2003 SCMR 1221; Rahim Jan v. Mrs. Z. Ikram Gardezi and others PLD 2004 SC 752 and Capital Development Authority through Chairman v. Raja Muhammad Zaman Khan and others PLD 2007 SC 121 rel.

Syed Khalid Javed Bukhari for Petitioner.

Ch. Saghir Ahmed and Muhammad Manzoor-ur-Haq for Respondents.

Date of hearing: 22nd May, 2013.

2013 P T D 2064

[Lahore High Court]

Before Umar Ata Bandial, C J

Messrs ALPHA CHEMICALS (PVT.) LTD. through Manager

Versus

FEDERATION OF PAKISTAN and 4 others

Writ Petition No.21513 of 2009, heard on 30th May, 2013.

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

----Ss. 81(2), 81(1), 80 & 79---Constitution of Pakistan Art. 199---Constitutional petition---Maintainability---Petitioner assailed final assessment order passed under S. 81(2) of the Customs Act, 1969---Alternate remedy---Contention of the petitioner was that since no appeal/remedy under the Customs Act, 1969 was available against an order passed under S.81(2) of the Customs Act, 1969 and such an order was the final determination of assessment duty with respect to goods that had been provisionally released under S. 81(1) of the Customs Act, 1969, it was therefore distinct from a final assessment order passed under S.79 or S.80 of the Customs Act, 1969 against which an appeal/ remedy was available---Held, that only in absence of any statutory remedy, resort to Constitutional jurisdiction of the High Court was justifiable.

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

----S. 81(2)---S.R.O. 567(I)/2006 dated 5-6-2006---Constitution of Pakistan, Art.199---Constitutional petition---Import of platinum sponge/ power---Exemption from payment of customs duty vide S.R.O. 567(I)/2006 dated 5-6-2006----Exemption from customs duties for import of platinum was denied to the petitioner on the ground that since the petitioner was a pharmaceutical company, it was entitled to only those exemptions specified in Table-III of S.R.O. 567(I)/2006 dated 5-6-2006; and not to the exemption provided for import of platinum in Table-I of the said S.R.O.---Validity---Specific exemptions for the pharmaceutical industry had been provided in Table-III of S.R.O. 567(I)/2006 dated 5-6-2006; nevertheless, there was no restriction on the claim of exemption by an importer under Table-I of S.R.O. 567(I)/2006 dated 5-6-2006 as it so happened that platinum was not an exempted item under Table-III of S.R.O. 567(I)/2006 dated 5-6-2006; whilst it was exempted under Table-I of said S.R.O.; therefore there was no special exemption for the pharmaceutical industry in respect of imported platinum, and there was a general exemption regarding the said item for all importers under Table-I of S.R.O. 567(I)/2006 dated 5-6-2006---Language of S.R.O. 567(I)/2006 dated 5-6-2006 did not place any restriction upon the persons entitled to exemption under Table-I of said S.R.O., therefore even though the petitioner belonged to the pharmaceutical industry, there was nothing to deprive it of the benefit if exemption under Table-I of S.R.O. 567(I)/2006 dated 5-6-2006---Impugned order was based on the misreading of the S.R.O. 567(I)/2006 dated 5-6-2006, and deprived the petitioner right of an exemption available to all importers under Table-I of S.R.O. 567(I)/2006 dated 5-6-2006----Impugned order was set aside and constitutional petition was allowed, in circumstances.

Mian Abdul Ghaffar for Petitioner.

Irtaza Ali Naqvi for Respondents.

Date of hearing: 30th May, 2013.

2013 P T D 2077

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs MULTAN FABRICS (PVT.) LTD. and another

S.T.R. No.5 of 2009, heard on 23rd May, 2013.

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

----S. 47---Reference to High Court---Scope---Factual findings of Appellate Authority upheld by Appellate Tribunal---Validity---Jurisdiction of High Court being advisory in nature could be invoked regarding question of law only---High Court could not re-appriase and re-assess such findings, thus, would decline to answer question referred regarding thereto---Illustration.

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

----S. 47---Reference to High Court---Jurisdiction---Scope.

The advisory jurisdiction of High Court is clearly distinguishable from its appellate or revisional jurisdiction.

Jurisdiction of High Court is advisory in nature and can only be invoked to resolve problematic and debatable questions of law instead of getting a decision for or against a party. Question of fact cannot be entertained and examined by High Court in its reference jurisdiction, unless there is perversity in the findings of fact. Only a question of law, if duly raised and ruled upon by the Tribunal can be said to have arisen out of order of Tribunal. Every question of law must not be referred to High Court and only those questions of law having some substance in it should be referred. Jurisdiction of High Court can only be invoked when the issues raised before and decided by Tribunal were of substantial nature and of general application to sizeable class of assessees. When the question framed is not of general application and revolves around the fact of that particular case and that particular assessee in that very assessment year, no substantial question can be said to have arisen.

The Lungla (Sylhet) Tea Co. Ltd. Syhet v. Commissioner of Income Tax Dacca, Circle Dacca 1970 SCMR 872; Revenue Legal Division Bahawalpur v. Zulfiqar Ali 2012 PTD 964; Pakistan Steel Mills Corporation (Pvt.) Ltd. Karachi v. Commissioner Inland Revenue 2012 PTD 723; Commissioner of Income Tax Wealth Tax Multan v. Muhammad Rafi Medical Officer DHQ Khanewal 2007 PTD 333 and Commissioner of Income Tax Wealth Tax Companies Zone-III, Lahore v. Messrs Hafiz Abdul Wahid and Brothers (Pvt.) Ltd., Lahore 2003 PTD 2846 fol.

Syed Khalid Javed Bukhari for Petitioner.

Sh. Zafar-ul-Islam and Niaz Ahmad Khan for Respondents.

Date of hearing: 23rd May, 2013.

2013 P T D 2121

[Lahore High Court]

Before Syed Mansoor Ali Shah and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER OF WEALTH TAX

Versus

Dr. Syed IMTIAZ ALI

Tax Appeal No.245 of 2000, heard on 13th November, 2012.

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

----Ss. 2(5)(16), 3 & 7---Wealth Tax Rules, 1963, R. 8(3)---CBR Circular No.7 of 1994, dated 10-7-1994---CBR Circular No.11 of 1994 dated 17-7-1994---Property in form of building---Determination of value of such property not as a composite unit, but in two parts i.e. its "constructed part" and " land part" separately on basis of CBR's Circular No. 7 of 1994, dated 10-7-1994 and Circular No. 11 of 1994, dated 17-7-1994---Validity---Word "assets" as defined in S. 2(5) of Wealth Tax Act, 1963 would include such property, which would be taken as a composite unit for valuation purposes---Prevalent market value of such property could not be determined on basis of its land and constructed building separately---Value of a building would be determined on basis of its annual rental value, and that of an open plot on basis of its value specified by Collector of District---Circular issued by Central Board of Revenue could not control meanings of an Act or Rules made thereunder---Both such Circulars could not be relied upon for being contrary to provisions of Wealth Tax Act, 1963 and R. 8(3) of Wealth Tax Rules, 1963---High Court set aside impugned order of Assessing Officer in circumstances.

Saleem Haji Rehmatullah Dada, Karachi v. Commissioner of Income Tax, Companies-V, Karachi 2003 PTD 593 rel.

(b) Words and phrases---

----"Property"---Definition stated.

Commissioner of Income Tax/Wealth Tax Sialkot v. Muhammad Siddique 2003 PTD 984 ref.

(c) Interpretation of statutes---

----Circulars issued by Federal Board of Revenue - Effect---Such circulars could not control meanings of Act and Rules made thereunder.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 rel.

Qazi Ghulam Dastgir for Appellant.

Hafiz Muhammad Idrees for Respondent.

Date of hearing: 13th November, 2012.

2013 P T D 2125

[Lahore High Court]

Before Syed Mansoor Ali Shah and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER INLAND REVENUE (ZONE-I), R.T.O. RAWALPINDI

Versus

Messrs AL-MEHDI INTERNATIONAL and 2 others

I.T.R. No.78 of 2012, decided on 17th September, 2013.

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

----Ss.13(1), 62 & 136---Income Tax Ordinance (XLIX of 2001) Ss.239 & 210---High Court Reference---Taxpayer was assessed under S.62 of the Income Tax Ordinance, 1979 whereafter an addition under S.13(1)(aa) of the Ordinance was made to the income of the taxpayer---Such addition was deemed to be irregular by the Income Tax Appellate Tribunal on the ground that approval of the Inspecting Additional Commission ("IAC") was not properly obtained as required under S.13(1) of the Income Tax Ordinance, 1979---Question before the High Court was whether approval of IAC was valid considering that the Taxation Officer carrying out the assessment enjoyed powers of the Commissioner by virtue of S.239 of the Income Tax Ordinance, 2001---Validity----Wisdom behind Taxation Officer seeking approval of the IAC under S. 13 of the Income Tax Ordinance, 1979 was that the addition was further reviewed by an officer senior-in-rank to the Taxation Officer so that a more informed and deliberative evaluation was done before allowing the addition under S. 13 of the Income Tax Ordinance, 1979 and the law did not solely rely on the discretion of the Taxation Officer junior to the IAC in this regard---Taxation Officer, even by delegation, if he were enjoying powers of the Commissioner, did not stand absolved from seeking approval from the higher officer, the IAC, under the law---Said situation would however change if the Taxation Officer was the Commissioner himself, as then seeking approval of the IAC would tantamount to seeking approval from a junior officer---Section 13(1) of the Income Tax Ordinance, 1979 would be rendered redundant in the new scheme of things under the new Income Tax Ordinance, 2001 and would stand impliedly repealed if the assessment was carried out by the Commissioner himself in face of S. 239(2) of the new Income Tax Ordinance, 2001---Under the facts and circumstances of the present case, the Taxation Officer was to seek the approval of the IAC, which was done, therefore, findings of the Appellate Tribunal were not justified---Reference was answered in the negative, in circumstances.

Commissioner of Income Tax Zone-A, Lahore v. A.L. Hamidi Lahore 2001 PTD 2247 Messrs Metro (Pvt.) Ltd. v. Taxation Officer, Circle-18, Coys Zone Islamabad, dated 29-7-2006 and CIT/WT, MTU, Peshawar v. Haji Sarwar Jan, dated 20-5-2006 ref.

NS Bindra's Interpretation of Statutes-10th Edition (page 1506) rel.

(b) Interpretation of statutes---

----Conflict of laws---Principles---In cases of conflict, preference would be given to the new law and an implied repeal of an earlier law could be inferred only where there was enactment of a later law which had the power to override the earlier law and was totally inconsistent with the earlier law, that is where two laws; the earlier and the later law, could not stand together---Such is a logical necessity because two inconsistent laws could not both be valid without contravening the principle of contradiction---Later laws abrogate earlier contrary laws.

NS Bindra's Interpretation of Statutes-10th Edition (page 1506) rel.

Ms. Shaheena Akbar for Petitioner.

Farooq Ahmad Nasir, Additional Commissioner Inland Revenue.

Amir Sultan, Law Officer.

Muhammad Aslam, Inland Revenue Officer.

Shujaat Ali, Inland Revenue, Audit Officer.

Hafiz Muhammad Idrees, Muhammdad Naeem-ul-Haq and Zahid Shafiq for Respondents.

Date of hearing: 14th February, 2013.

2013 P T D 82

[Peshawar High Court]

Before Miftah ud Din Khan and Mrs. Irshad Qaiser, JJ

TAJ WAZIR ENTERPRISES and another

Versus

COLLECTOR CUSTOMS and another

Customs Reference Application No.22 of 2006, decided on 10th October, 2012.

Customs Act (IV of 1969)---

----S.18---Statutory Regulatory Order (S.R.O.)---Applicability from date of notification---Scope---Export of wheat flour on 17-12-2005 and 18-12-2005 without payment of regulatory duty imposed vide S.R.O. 18(I)/2005, dated 3-1-2005---Demand of such regulatory duty from exporter (petitioner)---Validity---According to S.18 of Customs Act, 1969, regulatory duty would be leviable and recoverable on and from date specified in notification irrespective of its subsequent issuance in official Gazette---Impugned S.R.O. was made applicable from 17-12-2004 to all exporters of wheat flour, thus, same was not prejudicial to interest of a particular person---Impugned demand was, held, to be legal and enforceable in eyes of law---Reference was dismissed in circumstances.

2012 SCMR 619; PTCL 1999 CL 473, 1973 PTD 361, 2004 PTD 2267, PLD 1997 SC 582; 1992 SCMR 165 and 2005 PTD (Trib.) 1305 ref.

PTCL 1999 CL 473; PLJ 1997 SC 107(sic); PLD 2001 SC 340 and 2005 PTD (Trib.) 1305 rel.

Isaac Ali Qazi for Appellants.

Hashim Raza for Respondents.

Date of hearing: 10th October, 2012.

2013 P T D 185

[Peshawar High Court]

Before Miftah ud Din Khan and Mrs. Irshad Qaiser, JJ

AFTAB AHMED KHAN SHERPAO

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX, PESHAWAR

F.A.O. No.168 and S.A.Os. Nos.60 and 61 of 2001, decided on 9th October, 2012.

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

----S.16(4) & Second Sched. Cl. (8)---Protection of Economic Reforms Act (XII of 1992), S.5---Foreign currency account---Immunity against wealth tax---Scope---Foreign currency account maintained by assessee with a bank located in a foreign country---Non-disclosure of such account and amount credited therein by assessee in wealth tax return for relevant assessment year---Order of taxation of such amount passed by authority upheld by Appellate Authority and Appellate Tribunal---Assessee's plea that such account for being outside of Pakistan was immune from probe and exempt from levy of income tax and wealth tax---Validity---Provision of S. 5(1) and (2) of Protection of Economic Reforms Act, 1992 had an overriding effect and must be read together and not independently---According to S. 5(1) and (2) of Protection of Economic Reforms Act, 1992, foreign currency account maintained only in Pakistan by a citizen of Pakistan would be immune from levy of income tax and wealth tax---Agreement for Avoidance of Double Taxation between Government of Pakistan and Federal Council of foreign country in question dilated upon tax on income and not on assets/wealth---Provision of S.4 of Protection of Economic Reforms Act, 1992 related to free movement of foreign currency and not to taxation of deposits in foreign currency account---Where an asset/wealth was not specifically exempted from declaration by any law, but was required to be declared by Wealth Tax Act, 1963 same would be taxable if found taxable---High Court dismissed appeal in circumstances.

(b) Interpretation of statutes---

----Fisacal Statute, interpretation of---Scope---Fiscal statute would be construed liberally in favour of an assessee.

Abdur Rauf Rehaila for Appellant.

Mohd Khattak for Respondent.

Date of hearing: 9th October, 2012.

2013 P T D 240

[Peshawar High Court]

Before Waqar Ahmad Seth and Rooh-ul-Amin Khan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES, PESHAWAR

Versus

Messrs PAKISTAN REFRIGERATION (PVT.) LTD., PESHAWAR

Income Tax Reference Application No.24 of 2007, decided on 2nd October, 2012.

(a) Interpretation of statutes---

----Prospective or retrospective application of a statute---Scope---Statute would be deemed to be applicable from date of its promulgation, unless retrospective effect was given thereto with express provision.

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

----S.122(5A)---Provision of S.122(5A) of Income Tax Ordinance, 2001---Retrospective application---Scope---Statute would be deemed to be applicable from date of its promulgation, unless retrospective effect was given thereto with expression provision---Said provision, was not specifically made applicable with retrospective effect, therefore same would not apply to assessment finalized prior to its addition w.e.f. 1-7-2003.

2005 PTD 1621 and 2009 PTD 19 ref.

2009 PTD 16 and Commissioner Income Tax v. Messrs Eli Lilay Pakistan (Pvt.) Ltd. 2009 SCMR 1279 rel.

Shahid Raza for Appellant.

Syed Muddasir Aemer for Respondent.

Date of hearing: 2nd October, 2012.

2013 P T D 372

[Peshawar High Court]

Before Waqar Ahmad Seth and Rooh-ul-Amin Khan, JJ

COLLECTOR, SALES TAX AND FEDERAL EXCISE, PESHAWAR and another

Versus

Messrs CHERAT PAPER SACKS LIMITED through Chief Executive

S.A.O. No.48 of 2005, decided on 2nd October, 2012.

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

----Ss. 36C & 35C---Appeal to High Court---"Aggrieved person"---Scope---Only an aggrieved person or the Collector may file an appeal in the High Court in respect of any question of law arising out of an order under S. 35C of the Central Excise Act, 1944---Reference/Appeal, in the present case, was filed by Collector Sales Tax and Federal Excise and the Additional Director Intelligence and Investigation---Memorandum of reference was not signed by the said functionaries thus only by mentioning designation of said persons in the title, it could not be ascertained that the Reference/Appeal had been filed by the Collector---Power of attorney had not been signed by the Collector but by an unknown person from the Collectorate of Sales Tax---Such person could not be considered aggrieved person under S. 36C of the Central Excise Act, 1944--Term "aggrieved person", if it was referable to any officer of Sales Tax, then the word "Collector" would be a sheer addition to the statute and would make it redundant---Legislature had purposely used and signified two different expressions, which were "Collector" and "aggrieved person"---Redundancy could not be attributed to the legislature---Appeal to High Court was not main-tainable in circumstances.

Director, Directorate General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Limited and others 2006 SCMR 129 and Additional Collector Sales Tax v. Messrs Associated Industries Ltd. 2009 PTD 1799 rel.

(b) Interpretation of statutes---

----Redundancy could not be attributed to the Legislature.

(c) Words and Phrases---

----"Aggrieved person"----Connotation---Term "aggrieved person" denotes a person who had got a legal grievance i.e. a person illegally and wrongfully deprived of anything to which he was legally entitled to---"Aggrieved person" was not a person who suffered some sort of disappointment.

(d) Administration of justice---

----All acts shall be done in the manner in which they were prescribed to be done and not in another manner.

Abdul Rauf Rohaila for Appellant.

Issac Ali Qazi for Respondent.

Date of hearing: 2nd October, 2012.

2013 P T D 407

[Peshawar High Court]

Before Waqar Ahmad Seth and Rooh-ul-Amin Khan, JJ

ADDITIONAL DIRECTOR INTELLIGENCE AND INVESTIGATION, PESHAWAR

Versus

KHALIL MUHAMMAD

Customs Reference No.80 of 2009, decided on 3rd October, 2012.

Customs Act (IV of 1969)---

----Ss. 168, 180 & 196---Reference to High Court---Seizure and confiscation of vehicle---Assistant Director Customs, Intelligence, intercepted truck in question and respondent who claimed to be owner of said truck having failed to produce any proof with regard to lawful possession of said truck, same was sent to the Forensic Science Laboratory for examination---Laboratory reported after examination that the chassis number of the truck in question had been tampered with---Truck was seized and Deputy Director outrightly confiscated the same---Deputy Collector, (Appeals), released the truck to the respondent---Appellate Tribunal dismissed the appeal against the order of Deputy Collector (Appeals)---Held, in view of facts, overall circumstances of the case and report of Forensic Science Laboratory, department had proved the tampering in chassis number of truck in question---Collector and Appellate Tribunal, had not appreciated the chemical examiners' reports furnished by two different laboratories in its true perspective, and had arrived at an erroneous conclusion---Reference was accepted and judgment of Appellate Tribunal and judgment in order-in-appeal were set aside, and order of Deputy Collector confiscating truck, was restored, in circumstances.

PTCL 2007 SB 274 ref.

Shahid Qayum Khattak for Appellant.

Tasleem Hussain for Respondent.

Date of hearing: 3rd October, 2012.

2013 P T D 438

[Peshawar High Court]

Before Waqar Ahmad Seth and Rooh-ul-Amin Khan, JJ

Messrs SANA ENTERPRISES through Sole Proprietor, Peshawar

Versus

COLLECTOR OF CUSTOMS, PESHAWAR and 3 others

Writ Petitions Nos.1801-P and 1802-P of 2012, decided on 29th August, 2012.

Customs Act (IV of 1969)---

----S. 32(2)(3)---S.R.O. 509(1)/2007 dated 29-6-2007---Constitution of Pakistan, Art. 199---Constitutional petition---Demand notice issued by Customs Authorities in absence of statutory show cause notice---Legality---Importer (petitioner) imported consignments of "Acetate Tow" and availed concession under S.R.O. 509(I)/2007 dated 29-6-2007, wherein sales tax on import and supply of textile and articles thereof was chargeable at 0%---Subsequently during scrutiny of import clearance it was observed that "Acetate Tow" was meant for making cigarette filter rods and the benefit of S.R.O. in question had been wrongly extended to the importer---Demand notice was issued to the importer---Validity---Demand notice was always in consequence to the proceedings of show cause notice and adjudication---Customs Authorities had issued demand notice in absence of statutory show cause notice as provided by S. 32(2)(3) of Customs Act, 1969 and without adjudication or final determination as to whether the importer could have availed the benefit of S.R.O. in question---Impugned demand notice was issued by Customs Authorities without lawful authority and jurisdiction---Constitutional petition was allowed, impugned demand notice was set-aside and Customs authorities were directed to issue show cause notice to the importer and thereafter conclude adjudication proceedings.

Zahid Idris Mufti for Petitioner.

Abdul Rauf Rohaila for Respondents.

Date of hearing: 29th August, 2012.

2013 P T D 457

[Peshawar High Court]

Before Miftah-ud-Din Khan and Mrs. Irshad Qaiser, JJ

Haji SALEEM GUL and another

Versus

CUSTOM TRIBUNAL, PESHAWAR

Custom Reference No.15 of 2011, decided on 20th November, 2012.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 168 & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Reference to High Court---Smuggling---Seizure and confiscation of vehicle---Petitioners/importers having failed to produce any proof with regard to legal import or lawful possession of vehicle in question, the vehicle was seized under S.168 of the Customs Act, 1969 for violation of S.2(s) and S.16 of the Customs Act, 1969 and S.3(1) of Imports and Exports (Control) Act, 1950---Additional Collector of customs having confiscated the seized vehicle, petitioners' appeal before Collector Customs (Appeals) was dismissed---Appeal of the petitioners before the Customs Appellate Tribunal also dismissed the appeal---Validity---Appellate Tribunal had done nothing against law as there was nothing in the impugned judgment, which could show that finding handed down by the Appellate Tribunal was in derogation of any provision of the prevailing law---Petitioners, despite ample opportunity, could not produce anything in black and white to prove that vehicle in question was in their lawful possession---High Court which could interfere only on a question of law, could not come to the rescue of the petitioners---No question of law, had arisen in the reference which could be called for its answer by High Court, under S.196 of the Customs Act, 1969---Reference, being without substance, was dismissed, in circumstances.

Sakina Gul for Petitioners.

Azhar Naeem Quani for Respondent.

Date of hearing: 20th November, 2012.

2013 P T D 794

[Peshawar High Court]

Before Mian Fasih ul Mulk and Mrs. Irshad Qaiser, JJ

P.M. INTERNATIONAL through Partner and 3 others

Versus

FEDERATION OF PAKISTAN, MINISTRY OF FINANCE through Secretary and 6 others

Writ Petition No.949 of 2005, decided on 1st November, 2012.

Customs Act (IV of 1969)---

----Ss. 18, 19 & Preamble---Constitution of Pakistan, Art. 77---"Exemption" and "levy"---Distinction---"Taxability" and "payability"---Distinction---Grant of exemption of customs duty, effect of---Levy of customs duty under S. 18 of the Customs Act, 1969---Scope---Tax can not be levied or collected except under the authority of law and the same had been embodied in Art. 77 of the Constitution---"Act of Parliament" included "Ordinance promulgated by the President"---Customs Act, 1969 was a taxing statute and its charging provisions as contained in S. 18 were to be construed in favour of the subject, whereas exemption provisions contained in S. 19 were to be construed in favour of the Government---Assessee had to prove his entitlement for an exemption---Imposition of a tax or duty was a legislative power which could not be delegated to a subordinate authority empowering it to levy a tax or a duty---Power could be delegated to a subordinate authority for allowing exemption---Difference existed in "taxability" and its "payability"---While taxability was created by the Legislature, payability was to be enforced by the executive authority---Exemption concerns not the liability but only payability---Mere grant of exemption under S. 19 of the Customs Act, 1969 did not have the effect of altering the levy of duty under S. 18 of the Act, but the only legal effect was that the liability for the payment of duty that accrued under S. 18 on importation of goods, was to be wiped off to the extent exempted---Sections 18 and 19, of the Customs Act, 1969 therefore, operated independently and the exercise of power under S. 19 was distinct in character and scope, therefore, it could not have the effect of nulli-fying the statutory provisions contained in S. 18 of the Customs Act, 1969 whereby charge was created by the statute itself.

Customs v. Ravi Spinning Mills Ltd. 1999 SCMR 412; PLD 1978 Lah. 468; 1986 SCMR 1917 and 1997 CLC 106 rel.

Farhat Nawaz Lodhi for Petitioner.

Abdur Rauf Rohila for Respondents.

Date of hearing: 1st November, 2012.

2013 P T D 924

[Peshawar High Court]

Before Khalid Mehmood and Shah Jehan Khan Akhundzada

Messrs LOCOMOTIVE FACTORY PAKISTAN, RAILWAYS through Managing Director

Versus

APPELLATE TRIBUNAL CUSTOMS, EXCISE AND SALES TAX, PESHAWAR and 2 others

Sales Tax References Nos.23 to 25 and 70 of 2009, decided on 15th January, 2013.

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

----Ss. 45, 45A,45B, 46 & 47---Reference to High Court---Powers of adjudication---Scope---Show-cause notice was issued to the taxpayer by an officer and appeal thereagainst was also heard by the said officer who authored the order-in-original against the taxpayer---Taxpayer's appeal filed before the Appellate Tribunal comprised of two members, one of which (member technical) was the said officer and said officer authored the judgment of the Tribunal, which again went against the taxpayer---Validity---Interest of the Department was directly involved in the present case and the beneficiary of the impugned judgments was the Department, and said officer (member) being employee of the Department was certainly obliged to save the interest of the Department---Being Member (Technical), said officer had issued show cause notice and gave decision against the taxpayer, and he could not therefore, sit as a member of the Appellate Tribunal before whom the same issue was in the shape of the appeal, which was filed for a decision afresh---No one could sit as a judge to save and decide the matter in which his interest was directly involved, and in the present case, not only the interest of the author of the impugned judgment was involved, also the decision rendered in the impugned order-in-original by him, was under challenge---Impugned judgment was therefore not sustainable in view of all canons of law, ethics, the demands of justice and equity---High Court set aside the impugned judgment and remanded the matter to the Appellate Tribunal with the direction that the said officer should be excluded from the Appellate Tribunal for the hearing of the taxpayer's appeal---Reference was allowed, accordingly.

(b) Administration of Justice---

----No one could sit as a judge to save and decide a matter in which his interest was directly involved and no one could decide an appeal against an order which he himself passed.

Faisal Khan for Appellant.

Abdul Lateef Yousafzai for Respondents.

Date of hearing: 15th January, 2013.

2013 P T D 1259

[Peshawar High Court]

Before Mian Fasih-ul Mulk and Mrs. Irshad Qaiser, JJ

Messrs KAGHAN GHEE MILLS (PVT.) LIMITED

Versus

COLLECTOR OF CUSTOMS and others

S.A.O. No.27 of 2002, decided on 6th November, 2012.

Customs Act (IV of 1969)---

----Ss. 156(1)(62), 156(1)(90) & 96---Warehousing---Offence of illegal removal of goods from bonded warehouse without payment of applicable duties and taxes---Penalty (fine), quantum of---Taxpayer was found clandestinely removing material from bonded warehouse without payment of duties and taxes, and penalty under various sections of the Customs Act, 1969, including Ss. 159(1)(62) and 159(1)(90) was imposed on him, which was determined to be Rupees 500,000---Contention of the taxpayer was that under S. 159(1)(62) of the Customs Act, 1969, a maximum penalty of Rs.25000 could be imposed on him whereas contention of Customs Authorities was that in fact provisions of S. 158(1)(90) were applicable to the facts of the case under which penalty equal to ten times of value of goods could be imposed, therefore, the impugned order was not illegal---Taxpayer had admitted to have illegally removed the goods from the bonded warehouse in a clandestine manner without payment of duties and in token of such admission had deposited the principal amount of duties and taxes avoided by it---Collector had imposed penalty of a million rupees under various sections of the Customs Act, 1969 and the Sales Tax Act, 1990, however on appeal, the Appellate Tribunal reduced the same to Rupees 500,000---Held, taxpayer, in such cases, was only liable for penalty under S. 156(1)(62) of the Customs Act, 1969 whereunder maximum penalty of Rs. 25000 could be imposed---High Court directed the competent forum to give effect to the finding of the High Court---Appeal was allowed, accordingly.

C.P. No.173 of 2002 rel.

Isaas Ali Qazi for Appellant.

Talseem Hussain for Respondents.

Date of haring: 6th November, 2012.

2013 P T D 1552

[Peshawar High Court]

Before Mian Fasih-ul-Mulk, J

NORTHERN BOTTLING COMPANY (PVT.) LTD. INDUSTRIAL ESTATE, PESHAWAR

Versus

FEDERATION OF PAKISTAN

Writ Petition No.1232 of 2012, decided on 17th January, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122, 177 [as amended by Finance Act (XVI of 2010)] & 214---Constitution of Pakistan, Art. 199---Constitutional petition---Selection for audit---Self-assessment finalized under S. 120 of Income Tax Ordinance, 2001---Notice issued to assessee after more than one year of filing of tax return requiring him to produce record/ documents pertaining to several assessments for conducting tax audit by Commissioner---Petitioner's plea was that power to select case for tax audit vested in Federal Board of Revenue by virtue of S. 214(c) of Income Tax Ordinance, 2001, thus, Commissioner had no power to issue such notice; that impugned Notice was time barred; and that by virtue of Circular dated 5-10-2009 issued by Federal Board, selection of case for tax audit for multiple tax years was illegal---Validity---After substitution of S. 177 of Income Tax Ordinance, 2001 by Finance Act, 2010, Commissioner ceased to have power to select case for tax audit, rather same vested in Board exercisable through random computer ballot or on parametric basis---Impugned notice could be issued within financial year in which return was filed, but not thereafter---Board through said Circular (dated 15-10-2009) had deprecated practice of selecting cases for past tax years---Such instructions of Board were binding on Commissioner---Principles---High Court accepted constitutional petition in circumstances.

Messrs Chenone, Stores Ltd. v. Federal Board of Revenue 2012 PTD 1815 ref.

Utman Ghee Industries v. Commissioner of Income Tax 2002 PTD 63 and Chairman FBR and others v. Idrees Traders and others 2012 SCMR 597 = 2012 PTD 693 rel.

Sajid Ijaz Hotiana for Petitioner.

Mian Naveed Gul for Respondents.

Date of hearing: 17th January, 2013.

2013 P T D 1651

[Peshawar]

Before Nisar Hussain Khan and Rooh-ul-Amin Khan, JJ

Messrs KHYBER PAKHTUNKHWA TEXT BOOK BOARD, PESHAWAR

Versus

DEPUTY COMMISSIONER IR (E&C) and 2 others

Sales Tax Reference No.11-P of 2013, decided on 13th May, 2013.

Sales Tax Act (VII of 1990)---

----Ss.3, 2(3), 2(46) 13 & Sched.---Constitution of Pakistan, Art. 199---Constitutional petition---Scope of sales tax---Supplies---Exemptions---"Supply of books", and "printing services"---Distinction---Exemption available to textbooks did not extend to printing services---Taxpayer was Textbook Board engaged in the publishing and supply of textbooks---Taxpayer was served with a show cause notice on the ground that no sales tax was collected or withheld from printers, and subsequently an assessment order was passed against the taxpayer---Contention of the taxpayer/Textbook Board was that under the provisions of the Sales Tax Act, 1990 newspapers, books, journals, and periodicals were exempted from sales tax, and the process of printing was part and parcel of a book, and was therefore also exempted from sales tax Validity---Process of printing was not excluded from the definitions envisaged in Ss. 2(c), 2(33) and 2(46) of the Sales Tax Act, 1990 and it was evident on record that the Textbook Board was also engaged in the procurement of textbooks from different printers and dealt in purchase of miscellaneous taxable times used in printing and publishing of books---Supply of books and printing services were altogether different functions and S. 3 of the Sales Tax Act, 1990 provided exemption on the supply of books but did not exempt printing services provided by different printers and vendors---Any exemption provided to printers under garb of Sixth Schedule to the Sales Tax Act, 1990 would be a sort of amendment in the Act, and the Textbook Board was not vested with the power to extend exemption to a third person, that was the printing service providers---Textbook Board, if had printed textbooks on its own, then it might claim the exemption provided by the Sales Tax Act, 1990----Where the taxpayer Textbook Board paid tax on the purchase of paper from a third party, then printing services, particularly provided by private printers could not be exempted from the levy of tax; and it was an admitted fact that the Textbook Board every year paid a huge amount to the printers on account of only printing services and raw materials which included paper used in printing of books, were provided by the Textbook Board---Supply of books was no doubt exempted from payment of sales tax, however printing services by vendors to the Textbook Board were not exempted and the Textbook Board being a withholding agent was under the legal obligation to withhold/collect the sales tax from the printers---No illegality existed, therefore, in the impugned order---Reference was answered in the negative.

General Order No.3/2004 rel.

Ishtiaq Ahmad for Appellant.

Ghulam Shoaib Jally for Respondent.

Date of hearing: 13th May, 2013.

2013 P T D 1732

[Peshawar]

Before Dost Muhammad Khan and Qaiser Rashid Khan, JJ

ASHRAF INDUSTRIES (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Petroleum and Natural Resources Control Secretariat and 3 others

Writ Petition No.2514-P of 2012, decided on 13th June, 2013.

(a) Gas Infrastructure Development Cess Act (XXI of 2011)---

----Ss. 3, 4, 6(2), Second Sched. & Preamble---Constitution of Pakistan, Arts. 73(2), (3) & 199---Constitutional petition---Money Bill---Scope---Gas Infrastructure Development Cess Act, 2011 introduced (in the Parliament) as a Money Bill---Legality---Keeping in view provisions of Art. 73(2) of the Constitution, Gas Infrastructure Development Cess Act, 2011 did not fulfill the requirements of a Money Bill nor could it be held to be a Money Bill in its true legal parlance---Provisions and Second Schedule of the Gas Infrastructure Development Cess Act, 2011 were ultra vires of the Constitution and therefore void ab initio---Constitutional petition was allowed accordingly.

(b) Gas Infrastructure Development Cess Act (XXI of 2011)---

----Ss. 3, 4, 6(2) & Second Sched.---Constitution of Pakistan, Arts. 78, 81, 153, 158 & 199---Constitutional petition---Gas Infrastructure Development Cess (cess"), levy of---Constitutionality and legality---Discrimination, exploitation, irrationality and unreasonableness in levy of cess---Cess levied on proposed or planned facility/project---Mandatory procedure of Council of Common Interest not adopted---Bill regarding the cess tabled directly before the Parliament without getting approval from the Federal Cabinet---Effect---Return of cess levied to the consumers---Cess in question was to be utilized for the purpose of infrastructure development of Iran-Pakistan (Gas) Pipeline Project, Turkmenistan-Afghanistan-Pakistan-India(Gas) Pipeline Project, LNG or other projects or for price equalization of other imported alternate fuels including LPG---Initially, under Second Schedule of Gas Infrastructure Development Cess Act, 2011, Federal Government imposed the cess in question on the industrial sector at the rate of Rs.13 per MMBTU, however same was increased manifold up to Rs.669.23 per MMBTU---Subsequently Oil and Gas Regulatory Authority issued S.R.Os., whereby all consumers engaged in processing of industrial raw material into value added finished products, including hotel industries and other industries providing finished goods and commodities for the public, irrespective of volume of gas consumed, were brought under the net of the cess at the rate of Rs.460 per MMBTU with minimum charges of Rs.15510.78 per month---Subsequently Federal Government further increased the cess through a simple press release issued by Oil and Gas Regulatory Authority---Plea of petitioners/consumers was that increase in cess made in the said manner and its recovery from the industrial consumers was void ab initio, discriminatory and ultra vires of the Constitution---Validity---In the Second Schedule of Gas Infrastructure Development Cess Act, 2011, there was great disparity of cess rates both region-wise and with regard to the kind of industry, which was based on no intelligible differentia nor any sound rationale, and it also amounted to excessive delegation of legislative powers---For giving legal and constitutional validity and legitimacy to such discriminatory treatment, neither any meeting of Council of Common Interest ("the Council") was held nor consent of its constituting members was obtained, which was a must in the circumstances---Clear case of discrimination was made out by enacting provisions of the Gas Infrastructure Development Cess Act, 2011 because Art. 158 of the Constitution provided that the Province in which the well head of natural gas was situated, shall have precedence over other parts of the country in meeting the requirements of that well head, but in the impugned Act, Provinces producing natural gas had not been given any concession or relief whatsoever---Levying and recovering of cess on random rates clearly offended mandatory and commanding provisions of Art. 158 of the Constitution---Bill of the impugned Act was tabled directly before the Parliament, whereas in a Parliamentary system of Government and because of Federal Government Business Rules, it was mandatory that before tabling any Bill before the Parliament for legislation, it should be placed before the Federal Cabinet presided over by the Prime Minister, and if the cabinet approved the same, then the Bill could be tabled before the Parliament---Article 78 of the Constitution required that all revenue and money received by the Federal Government shall be made part of Federal Consolidated Fund, while Art. 81 of the Constitution provided those expenditure which were to be charged upon the said Fund---Impugned cess was neither a tax nor fell within the definition of "revenue" of the kind which had to be deposited in the Federal Consolidated Fund nor the Gas Infrastructure Development costs could be charged on the Federal Consolidated Fund---Question as to how the cess was managed and by whom and under whose authority, and under which head of account the cess amount was deposited, was not certain---Even if the cess was authorized by any authority of the Federal Government, it was not clearly enumerated in any of the provisions relating to financial matters of the Federal Government---Cess could not be collected on future prospects of any proposed or planned facility, which was yet to be provided---Iran-Pakistan (Gas) Pipeline Project was not yet signed nor made functional till date, while the cess was being collected for the last many years from industrial and other alike consumers of natural gas on the proposition that on completion of the gas pipeline projects they would be provided increased supply of natural gas to meet their future requirements---Very fate of gas pipeline projects in question was uncertain and unpredictable---Imposition, levy and collection of the cess in question was irrational and unreasonable because in case industrial consumers after paying millions of rupees of cess, closed down their businesses, they would get nothing in return for the cess they had paid in advance---No provision of the Constitution, expressly or impliedly, authorized the Parliament or the Government to impose, levy or collect the cess in question from industrial consumers of natural gas---Provisions of the impugned Act, imposing, levying and recovering the cess in question, were absolutely expropriatory, exploitative and constitutionally illegitimate---Provisions and Second Schedule of the Gas Infrastructure Development Cess Act, 2011 were in conflict with clear provisions of the Constitution regarding imposition of taxes and collection of revenues etc. and therefore were void ab initio---Constitutional petition was allowed accordingly and High Court directed that Government should return the cess in question lump sum to the petitioners/ consumers within a reasonable time and in case it was impossible or impractical to do the same, then handsome amount of the same should be adjusted in the monthly consumption bill of each petitioner/ consumer.

(c) Interpretation of Constitution---

----Constitution being an organic law, must be read as a whole and none of its provisions should be taken in isolation for the purpose of construction.

(d) Constitution of Pakistan---

---Art. 199---Constitutional jurisdiction of High Court---Judicial review of a legislative instrument/law enacted by the Parliament---Scope---Superior Courts were conferred power of judicial review to examine the constitutional legitimacy of any legislative instrument/law enacted by the Parliament.

(e) Words and phrases---

---"Tax" and "cess"---Distinction.

(f) Cess---

----Levy of cess on basis of future prospects of any proposed or planned facility---Legality---Cess was collected on subsisting and existing services rendered by the State/Government or its functionaries to a particular segment of society/consumer---Cess could not be collected on future prospects of any proposed or planned facility, which was yet to be provided---Once a project/facility was completed and made functional and operative, (only) then cess was collected for such project/facility.

Ishtiaq Ahmad for Petitioner.

Javed Ali Asghar, Saeed Khan, Akhunzada, Arbab Muhammad Tariq and Fazal-e-Karim and Barrister Haroon Dugal for Respondents.

Date of hearing: 13th June, 2013.

2013 P T D 1988

[Peshawar High Court]

Before Yahya Afridi and Ikramullah Khan, JJ

ADDITIONAL DIRECTOR, INTELLIGENCE AND INVESTIGATION

Versus

BANARAS KHAN

Custom Reference No.10-P of 2013, decided on 31st May, 2013.

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

----Ss. 2(s), 168, 156(1), 181 & 196---Imports and Exports (Central) Act ( XXXIX of 1950), S.3(3)---S.R.O. 499(I)/2009, dated 13-6-2009---Smuggled vehicle, seizure and confiscation of---Non-availability of import record of such vehicle in Customs Data Bank---Order of Appellate Tribunal releasing such vehicle on payment of fine equal to 15% of its customs value in addition to duty and taxes leviable thereon---Plea of Revenue was that impugned order was violative of S.R.O. 499(I)/2009 dated 13-6-2009 prohibiting such release---Validity---Neither such S.R.O. could curtail powers of Adjudicating Authority nor would he be bound by instructions/ directions/orders contained therein while exercising a quasi-judicial function---Adjudicating Authority in his discretion could impose fine in lieu of confiscation of vehicle---Confiscated vehicle for being property of Government used to be auctioned on nominal price on fake names to relatives and kins of auction mafia within institution---Release of such vehicle on payment of fine and additional duty and taxes would be more beneficial to State instead of its confiscation and auction in such clandestine manner---Board had amended such S.R.O. subsequently allowing release of non-customs paid vehicles plying in country on payment of concessional duty---Police personnel having seized such vehicle were neither authorised officer under Customs Act, 1969 nor had they power of seizure except in case of tempering of chassis---Confiscation of such vehicle in garb of such S.R.O. after its illegal seizure by Police Personnel was not justified---High Court dismissed reference application in circumstances.

Sheikh Nazir Ali v. Customs Central and Excise and others PTCL 2002 CL 340 and Additional Director Intelligence and Investigation, Peshawar v. Sartaj Khan T.R. 5-P/2012 rel.

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

----Ss. 168, 156(1), 181 & 223---S.R.O. 499(I)/2009, dated 13-6-2009---Smuggled vehicles, seizure and confiscation of---Release of such vehicle on payment of fine by Adjudicating Authority despite issuance of S.R.O. 499(I)/2009 dated 13-6-2009 prohibiting such release---Validity---Neither such S.R.O. could curtail powers of Adjudicating Authority nor would he be bound by instructions/ directions/orders contained therein while exercising a quasi-judicial function---Adjudicating Authority would be bound to make his decision keeping in view facts and circumstances of case and law applicable thereto---Adjudicating Authority in his discretion could impose fine in lieu of confiscation of vehicle.

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

----Ss. 168 & 156(1)---S.R.O. 499(I)/2009, dated 13-6-2009---Smuggled vehicle---Seizure of such vehicle by police personnel not being authorised officer under Customs Act, 1969 nor having been conferred with power of its seizure---Confiscation of such vehicle by customs authorities in garb of S.R.O. 499(I)/2009 dated 13-6-2009---Validity---Police Personnel could not seize vehicle except in case of tempering of its chassis number---Confiscation proceedings conducted on basis of such illegal seizure of vehicle and its confiscation was, not legally justified.

Ishtiaq Ahmad for Petitioner.

Ajoon Khan for Respondents.

Date of hearing: 31st May, 2013.

2013 P T D 2038

[Peshawar High Court]

Before Mian Fasih-ul-Mulk and Assadullah Khan Chamkani, JJ

SAEED IQBAL INTELLIGENCE OFFICER CUSTOMS INTELLIGENCE

Versus

HASANAT AKHTER and another

Quashment Petition No.72 converted into Writ Petition No.1740 of 2006, decided on 31st January, 2013.

Customs Act (IV of 1969)---

----S. 185-F---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Order of Special Judge, Customs allowing pre-arrest bail to respondent and allowing release of seized goods from Bonded Warehouse---Quashment petition converted into constitutional petition by High Court---Seized goods had already been released to respondent---Petitioner, if aggrieved by such order, was required to have filed appeal before Special Appellate Court under S. 189-F of Customs Act, 1969---High Court dismissed constitutional petition for being not maintainable.

Shahid Qayum Khattak for Petitioner.

Isaq Ali, D.A.-G. and Javed Ali Asghar for Respondents.

Date of hearing: 31st January, 2013.

2013 P T D 59

[Balochistan High Court]

Before Muhammad Noor Meskanzai and Abdul Qadir Mengal, JJ

COLLECTOR OF CUSTOMS, QUETTA

Versus

CUSTOMS, SALES TAX AND CENTRAL EXCISE, APPELLATE TRIBUNAL-III, QUETTA and another

Custom Appeal No.2 of 2005, decided on 3rd September, 2012.

Customs Act (IV of 1969)---

----Ss. 194-C(4) & 196---Appellate Tribunal---Single Member---Pecuniary jurisdiction---Scope---Valuation of smuggled items---Seizure of smuggled goods and vehicle used to transport the same by Customs authorities (original order)---Collector Customs (appeal) released the vehicle on payment of redemption fine (appellate order)---Appellate Tribunal set aside the original order---Question was whether in such circumstances appellate order also automatically stood annulled---Contention on behalf of Collector Customs (appellant) was that jurisdiction of Single Member of Appellate Tribunal to hear an appeal was Rs.100,000 at the relevant time, whereas the valuation of seized goods exceeded Rs.500,000, therefore, Appellate Tribunal was not competent to have passed the impugned order---Contention on behalf of vehicle owner (respondent) was that Single Member of Appellate Tribunal was competent to hear appeals where valuation of smuggled items did not exceed Rs.500,000, and that his appeal was found competent by the Appellate Tribunal as valuation of seized goods was Rs.361,000---Validity---At the time of appeal in question Single Member of Appellate Tribunal was authorized to hear matters involving amounts up to Rs. 100,000 but this was subsequently amended to Rs.500,000---Amendment could not be given retrospective effect and a jurisdictional defect could not be rectified on the same basis---Valuation of smuggled goods collectively exceeded Rs.500,000---Single Member of Appellate Tribunal did not have the jurisdiction to adjudicate upon the matter at the relevant time---Appellate Tribunal had set-aside the original order but the appellate order still occupied the field---Impugned order of Appellate Tribunal was set-aside and case was remanded to the Tribunal for decision in accordance with the law.

Messrs Aman and Amin Trading Co. through Proprietor v. Deputy Collector of Customs, Appraising Intelligence Branch, Karachi 2008 PTD Kar. 459 rel.

Ch. Mumtaz Yousaf for Petitioner.

Ehsan Rafique for Respondents.

Date of hearing: 24th July, 2012.

2013 P T D 440

[Balochistan High Court]

Before Jamal Khan Mandokhail and Ghulam Mustafa Mengal, JJ

COLLECTOR OF CUSTOMS, FEDERAL EXCISE AND SALES TAX, QUETTA

Versus

RAMZAN and another

Custom Reference No.19 of 2008, decided on 3rd December, 2012.

Customs Act (IV of 1969)---

----Ss. 181, 15, 16 & 196---Notification S.R.O. 574(I)/2005 dated 6-6-2005---Reference to High Court---Seizure of vehicle used in conveyance of smuggled goods---Option for payment of fine in lieu of confiscated goods---Quantum of fine---Scope---Collector Customs impugned order of Customs Appellate Tribunal whereby quantum of fine imposed upon accused for release of vehicle used in smuggling was reduced---Validity---Section 181 of the Customs Act, 1969 empowered the Adjudicating Officer to give the owner of the goods an option to pay fine in lieu of confiscation of goods, such fine as he thought fit, and the proviso to said section provided that Federal Board of Revenue may by an order fix quantum of fine in lieu of confiscation on any goods or class of goods imported in violation of S.15 of the Customs Act, 1969 or of a notification under S.16 of the Customs Act, 1969 or any other law for the time being in force---Quantum of fine, in the present case, was in accordance with S.R.O. 574(I)/2005 dated 6-6-2005 and in the light of the same, there was no merit in present Reference application of the Collector---Reference application was dismissed.

Said Gul v. The Collector of Customs and others (sic) ref.

Ch. Mumtaz Yousaf, Standing Counsel along with Muhammad Azam Chughtai, Law Officer Customs for Appellants.

Nemo for Respondents.

Date of hearing: 31st July, 2012.

2013 P T D 651

[Balochistan High Court]

Before Jamal Khan Mandokhail and Ghulam Mustafa Mengal, JJ

INSPECTOR-GENERAL, FRONTIER CORPS BALOCHISTAN through Collector of Customs, Sales Tax and Federal Excise, Quetta

Versus

Messrs ALLAUDDIN and another

Customs Reference No. 58 of 2006, decided on 3rd December, 2012.

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

----S. 196---Limitation Act (IX of 1908), S. 5---Reference to High Court---Limitation period---Scope---Application for condonation of delay, dismissal of---Period of filing a Reference (to High Court) had been prescribed under S. 196 of Customs Act, 1969, which was 90 days of the date on which the aggrieved person or Collector, as the case might be, was served with the order of the Appellate Tribunal---Where limitation was provided by any special enactment, other than the Limitation Act, 1908, then S. 5 of the Limitation Act, 1908 would not be applicable for purposes of condonation of delay---Application was dismissed accordingly.

(b) Limitation Act (IX of 1908)---

----S. 5---Condonation of delay---Limitation period provided by a special enactment---Applicability of S. 5 of Limitation Act, 1908 in such a case---Scope---Where limitation was provided by any special enactment, other than the Limitation Act, 1908, then S. 5 of the said Act would not be applicable for purposes of condonation of delay.

Ch. Mumtaz Yousaf, Standing Counsel for Appellants.

Nemo for Respondents.

Date of hearing: 31st July, 2012.

2013 P T D 2116

[Balochistan High Court]

Before Jamal Khan Mandokhail and Ghulam Mustafa Mengal, JJ

COLLECTOR OF CUSTOMS, FEDERAL EXCISE AND SALES TAX CUSTOMS HOUSE, QUETTA and others

Versus

MUHAMMAD USMAN and others

Custom References Nos.20 and 23 of 2008, decided on 15th July, 2013.

Customs Act (IV of 1969)---

----S.181---S.R.O. No. 574(I)/05, dated 6-6-2005---Confiscated goods---Option to pay fine---Order passed by Adjudication Officer confiscating vehicles of respondents subject to payment of 30% redemption fine, were maintained by Appellate Authority---Customs Appellate Tribunal reduced amount of redemption fine---Validity---Adjudication Officer was empowered to give owner of goods an option to pay in lieu of confiscation of goods such fine as he thought fit, whereas second proviso provided that Board might by an order fix an amount of fine which in lieu of confiscation could be imposed on any goods or call of goods imported in violation of provisions of S. 15 or of a notification issued under S. 16 of Customs Act, 1969, or any other law for the time being in force---In exercise of such powers, Central Board of Revenue issued S.R.O. No. 574(I)/05, dated 6-6-2005, which had provided quantum of fine should not be less than specified in Column No.3 and other taxes and penalties imposed under relevant law, which rate had been fixed as 30% of the Customs value, in case of lawfully registered conveyance found carrying goods under S. 2(s) of Customs Act, 1969---High Court set aside the order passed by Customs Appellate Tribunal and restored that of Adjudication Officer---Reference was allowed accordingly.

Ch. Mumtaz Yousaf, Standing Counsel and Muhammad Azam for Appellants. (in Customs References Nos. 20 and 23 of 2008).

Sadbar Jan for Respondents (in Customs Reference No.20 of 2008).

Nemo for Respondent (in Customs Reference No.23 of 2008).

Date of hearing: 2nd May, 2013.

2013 P T D 2217

[Balochistan High Court]

Before Ghulam Mustafa Mengal, J

COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX

Versus

ABDUL RASHID

Customs Appeal No.4 of 2003, decided on 10th July, 2013.

Customs Act (IV of 1969)---

----Ss. 2(s)(i)(ii)(iii), 156(1)(89), 168(2) & 180---Smuggling---Appreciation of evidence---Accused was arrested and was charged for smuggling 577 yards of foreign cloth but Trial Court acquitted him---Validity---Though smuggled goods were taken into custody by police but the same were not transmitted to Customs authorities, with a result that no notice under S. 180 of Customs Act, 1969, was served upon accused within the prescribed period as provided under S. 168 (2) of Customs Act, 1969, for confiscation of seized goods---Accused in view of such lapse, filed application before Trial Court for return of goods, which was accepted and goods were ordered to be returned to accused---Goods recovered from accused were not stated in the goods listed in S. 2 (s)(i) and (ii) of Customs Act, 1969 nor it was the case of prosecution that goods were brought into the country by unauthorized route, so as to bring it within the category of smuggled goods under S. 2(s)(iii) of Customs Act, 1969, therefore, the goods could not be treated as smuggled goods and no offence under S. 156(1)(89) of Customs Act, 1969 were made out---Value of goods seized were below the specified limit, as such Trial Court had rightly held that the case did not fall within the scope of "smuggled" goods as defined under S. 2(s) of Customs Act, 1969 and provisions of S.156(1)(89) of Customs Act, 1969, were not attracted against accused---Trial Court had given valid reasons for acquittal of accused and authorities failed to point out that finding arrived at by Trial Court was result of any illegality or jurisdictional defect---High Court declined to interfere in the judgment passed by Trial Court---Appeal was dismissed in circumstances.

Ch. Mumtaz Yousaf Standing Council and Haji Muhammad Azam, Law Officer, Customs for Appellant.

Nemo for Respondent.

Date of hearing: 3rd May, 2013.

2013 P T D 786

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar and Sh. Azmat Saeed, JJ

Messrs COLONY INDUSTRIES (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

Civil Petition No.1774-L of 2009, decided on 2nd July, 2012.

(Against the judgment dated 17-6-2009 of Lahore High Court, Lahore passed in Writ Petition No.3101 of 2003).

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

----S.24---Re-audit of registered person---Scope---Re-audit being not barred by law, could be ordered, when its foundation was based upon fraud, which would vitiate most solemn proceedings.

Messrs Faisal Enterprises v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others 2003 PTD 899 and Messrs Muskzar Knit-wears (Pvt.) Ltd., through Chief Executive, Lahore v. Federation of Pakistan Ministry of Finance, Economic Affairs and Statistics 2004 PTD 714 ref.

(b) Fraud---

----Fraud would vitiate most solemn proceedings.

Sajid Mehmood Sheikh, Advocate Supreme Court for Petitioner.

Nemo for Respondents.

2013 P T D 831

[Supreme Court of Pakistan]

Present: Ejaz Afzal Khan and Ijaz Ahmed Chaudhry, JJ

Messrs C.M. PAK. LTD.

Versus

ADDITIONAL COMMISSIONER, INLAND REVENUE, ISLAMABAD and others

Constitutional Petition No.834 of 2011, decided on 26th September, 2012.

(On appeal against the judgment dated 25-5-2011 passed by Islamabad High Court, Islamabad in Tax Reference No.172 of 2011).

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

----S. 3(1)(d) [since substituted by the Finance Act, (I of 2008)]---Levy of excise duty on service originated outside but provided or rendered in Pakistan [prior to amendment in S. 3(1)(d) of Federal Excise Act, 2005 inserted by Finance Act, 2008]---Scope---For purposes of levying and collecting excise duty what was required to be looked into was services provided or rendered in Pakistan---Words "provided or rendered" used in S.3(1)(d) of Federal Excise Act, 2005 (prior to amendment introduced by Finance Act, 2008) would alone be enough to justify levy and collection of excise duty on service originating outside but provided or rendered in Pakistan.

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

----S. 34A---Reference to High Court---Scope---Question of fact cannot be raised in a reference before the High Court---Reference before High Court invariably lies on a question of law.

Ali Sibtain Fazli, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Petitioner.

M. Bilal, Senior Advocate Supreme Court for Respondents Nos.1 and 3.

Baber Bilal, Advocate Supreme Court for Respondent No.2.

Date of hearing: 26th September, 2012.

2013 P T D 897

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk and Tariq Parvez, JJ

Messrs A.C.P. OIL MILLS (PVT.) LIMITED

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (APPRAISEMENT) and another

Civil Petitions Nos. 802 and 813 of 2012, decided on 13th February, 2013.

(On appeal from the judgment of the High Court of Sindh, Karachi, dated 24-2-2012 passed in Special Customs Reference Applications Nos.584, 585, 586 and 587 of 2011).

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

----Ss. 32 & 156(1)(14)---Constitution of Pakistan, Art. 185(3)---False statement, error, etc.---Deliberate mis-declaration of goods---Submission of fake and forged documents at the time of clearance of goods---Tampering with PCT heading---Imposition of personal penalty on the importer---Scope---Company (petitioner) imported some material declaring the same under PCT headings 7210.5000 described as Tin Free Steel Sheets (Secondary Quality), attracting custom duty @ 10%---Subsequently it was discovered that material imported was Electrolytic Tin Plate, covered under PCT heading 7210.1200, on which 25% duty was leviable---Company had submitted fake and forged photocopies of original documents to the Customs authorities at the time of clearance and also tampered with the PCT headings---Material imported was confiscated by Customs authorities with an option to redeem the same after payment of fine along with leviable duty---Customs authorities also imposed a personal penalty on the company under S.32 read with S.156(1)(14) of Customs Act, 1969---Order of Customs authorities was upheld by all the appellate forums---Plea of company that mis-declaration was not deliberate and there was no evidence to show that management of company knowingly made a false declaration, and that declaration was made on basis of documents sent by the exporter for which company could not be held responsible---Validity---Management of the company had deliberately made a mis-declaration regarding the nature of goods imported---Company and its clearing agent had submitted photocopies instead of original invoices and letters of credit at the time of clearance---Original documents were clearly different compared to the photocopies submitted earlier---Original invoices classified the goods under PCT heading 7210.1200, 7210.5110 and 7209.9000 whereas photocopy of an invoice tendered earlier described the goods under PCT heading 7210.5000, therefore, photocopies had been tampered with---Petition for leave to appeal was dismissed in circumstances and leave was refused.

(b) Constitution of Pakistan---

----Art. 185(3)---Petition for leave to appeal to Supreme Court---Concurrent findings of fact recorded by all forums below---Supreme Court would be slow in interfering in concurrent findings of fact recorded by all the forums below.

Malik Qamar Afzal, Advocate Supreme Court for Petitioner.

Raja Muhammad Iqbal, Advocate Supreme Court for Respondents.

Date of hearing: 13th February, 2013.

2013 P T D 1023

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani, Mian Saqib Nisar and Muhammad Ather Saeed, JJ

Messrs BLUE STAR SPINNING MILLS LTD.

Versus

COLLECTOR OF SALES TAX and others

Civil Review Petitions Nos.47-L to 49-L of 2012 in Civil Petitions Nos.1691-L to 1693-L of 2008, decided on 9th January, 2013.

(To review this Court's judgment dated 18-6-2012 passed by this Court in Civil Petitions Nos.1691-L to 1693-L of 2008).

(a) Limitation Act (IX of 1908)---

----S. 3---Constitution of Pakistan, Art. 188---Review of Supreme Court judgment---Void order---Limitation for challenging a void order---Scope---Sales Tax Department passed order-in-original against the petitioner-company---Appeal filed against such order was dismissed by the Appellate Tribunal as being time-barred---Petitioner-company contended that order-in-original passed by Department was a void order; that no limitation ran against a void order, and that such aspect was not appreciated by the Appellate Tribunal, the High Court and the Supreme Court---Validity---Rule that no limitation ran against a void order was not an inflexible rule---Party could not sleep over to challenge a void order and it was bound to challenge the same within the stipulated/prescribed time period of limitation from the date of knowledge before the proper forum in appropriate proceedings---Appeal filed before the Appellate Tribunal was admittedly time-barred, and was rightly dismissed as being hit by limitation and no sufficient cause for condonation of delay was found---High Court agreed with the order of Appellate Tribunal---Supreme Court had affirmed concurrent findings recorded by fora below---Review petition was dismissed in circumstances.

Chief Settlement Commissioner v. Muhammad Fazil PLD 1975 SC 331 and Muhammad Raz Khan v. Government of N.-W.F.P. PLD 1997 SC 397 rel.

(b) Limitation Act (IX of 1908)---

----S.3---Void order---Limitation for challenging a void order---Scope---Rule that no limitation ran against a void order was not an inflexible rule---Party could not sleep over to challenge a void order and it was bound to challenge the same within the stipulated/prescribed time period of limitation from the date of knowledge before the proper forum in appropriate proceedings.

Chief Settlement Commissioner v. Muhammad Fazil PLD 1975 SC 331 and Muhammad Raz Khan v. Government of N.-W.F.P. PLD 1997 SC 397 rel.

(c) Constitution of Pakistan---

----Art. 188---Review of Supreme Court---Judgment---Scope---Supreme Court in exercise of its review jurisdiction could not sit as a court of appeal against its own order.

Dr. Ilyas Zafar, Advocate Supreme Court and Mahmood ul Islam, Advocate-on-Record for Petitioner.

Nemo for Respondents.

Date of hearing: 9th January, 2013.

2013 P T D 1041

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk and Tariq Parvez, JJ

Messrs AGRO PACK (PVT.) LIMITED, PESHAWAR

Versus

ASSISTANT COMMISSIONER INLAND REVENUE PESHAWAR and another

Civil Petitions Nos. 271-P to 295-P of 2011, decided on 24th January, 2013.

(On appeal from the judgment of the Peshawar High Court, Peshawar, dated 29-3-2011 passed in Customs References Nos.42 to 66 of 2010).

Sales Tax Act (VII of 1990)---

----S. 4, first proviso, Cl. (iii)---Customs Rules, 2001, R. 247(c)(i)---S.R.O.190(I)/2002 dated 2nd April, 2002---Constitution of Pakistan, Art.185(3)---Claim for refund of sales tax---Exemption from sales tax granted on exported goods in terms of R. 247(c)(i) of Customs Rules, 2001---Scope---Tax payer (petitioner) was granted manufacturing bond license under the Customs Rules, 2001 and exported its products to Afghanistan---Tax payer was exempted from payment of sales tax on raw material utilized in manufacturing of its exported products---Tax payer claimed refund of sales tax paid by it on electricity bills and packing material used for products exported to Afghanistan in terms of R. 247(c)(i) of Customs Rules, 2001---Claim of tax payer was rejected by tax authorities on the basis of S.R.O.190(I)/2002 dated 2nd April, 2002---Appeals filed by tax payer before appellate fora and the High Court were also dismissed---Tax payer contended that it was entitled to refund of sales tax in accordance with R. 247(c)(i) of Customs Rules, 2001; that S.R.O.190(I)/2002 dated 2nd April, 2002 relied upon by the tax authorities was issued under a different regime i.e. Sales Tax Act, 1990 and thus was not attracted to the claim of the tax payer, which was based on the Customs Rules, 2001---Validity---S.R.O.190(I)/2002 dated 2nd April, 2002 was issued by Federal Government in exercise of its power under clause (iii) of the first proviso to S.4 of Sales Tax Act, 1990, which clause allowed Government to withdraw the exemption from payment of sales tax on goods exported---Exemption from sales tax could only be granted under the Sales Tax Act, 1990 and the Rules framed thereunder---Rule 247(c)(i) of Customs Rules, 2001, on proper construction did not provide for such exemption---Provision of issuing invoice under R.247(c)(i) of Customs Rules, 2001 was only procedural and not a substantive provision granting exemption from sales tax---Contention of tax payer that S.R.O.190(I)/2002 dated 2nd April, 2002 was issued under Sales Tax Act, 1990 and thus could not take away an exemption granted under Customs Rules, 2001 was devoid of merits---Petition for leave to appeal was dismissed in circumstances.

Pakistan v. Aryan Petro Chemical Industries (Pvt.) Ltd. 2003 SCMR 370 distinguished.

Abdul Latif Yousafzai, Senior Advocate Supreme Court and Muhammad Ajmal Khan, Advocate-on-Record for Petitioner (in all cases).

Dr. Farhat Zafar, Advocate Supreme Court for Respondents (in all cases).

Date of hearing: 24th January, 2013.

2013 P T D 1491

[Supreme Court of Pakistan ]

Present: Iftikhar Muhammad Chaudhry, C.J., Ijaz Ahmed Chaudhry and Iqbal Hameedur Rahman, JJ

Engineer IQBAL ZAFAR JHAGRA and another

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petitions Nos.33 and 34 of 2005 and Civil Miscellaneous Application No.3821 of 2013, decided on 21st June, 2013.

(Regarding sudden increase in petroleum products on 13-6-2013 due to increase in sales tax)

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

---Ss. 3, 13(1) & Sixth Sched.---Provisional Collection of Taxes Act (XVI of 1931), Ss. 3, 4 & 5---Sales Tax Special Procedures Rules, 2007, R. 20(2)(c), proviso---Price Control and Prevention of Profiteering and Hoarding Act (XXIX of 1977), Ss. 6 & 7---Constitution of Pakistan, Arts.3, 9, 24, 70, 77 & 184(3)---Constitutional petition under Art.184(3) of the Constitution regarding sudden increase in prices of petroleum products due to increase in general sales tax---Federal Government/ Executive increasing general sales tax (GST) from 16% to 17% with immediate effect on the value of taxable supplies by way of a declaration under S. 3 of Provisional Collection of Taxes Act, 1931, pending passing of the Finance Bill (Money Bill) 2013-14 in the Parliament ---Legality---Plea of Federal Government that in view of Art.77 of the Constitution taxing power of the Parliament could be delegated to the Government/Executive and the delegatee of such power might then decide at what rate tax was to be imposed or what exemption or reduction, if any, was to be granted---Validity---Article 77 of the Constitution laid down that no tax shall be levied for the purpose of the Federation except by or under the authority of Act of Majlis-e-Shoora (Parliament)---Declaration in question, which was inserted in the Finance Bill (Money Bill) 2013-14 was an executive act of the Government and not a legislative act of the Majlis-e-Shoora (Parliament) unless it was passed by the Majlis-e-Shoora (Parliament), therefore, imposition or increase as well as reduction of the General Sales Tax (GST) with immediate effect in pursuance of the said declaration made under S. 3 of the Provisional Collection of Taxes Act, 1931 was against salutary principle envisaged by Art.77 of the Constitution---Delegation of power to the executive/government in the matter of imposing tax would create havoc in the tax regime---No such delegation could be considered to have been conferred upon the government in terms of S. 3 of the Provisional Collection of Taxes Act, 1931, allowing it to insert a declaration for the purpose of imposing/increasing or reducing General Sales Tax GST with immediate effect---Perusal of S. 3 of Provisional Collection of Taxes Act, 1931 showed that the Federal Government might cause to be inserted in the Finance Bill a declaration that it was expedient in the public interest that any provision of the Bill relating to increase or reduction of duty of customs or excise would have immediate effect---In the present case, the Finance Minister, in his budget speech, proposed to increase the General Sales Tax GST from 16% to 17% by amending S.3 of the Sales Tax Act, 1990, but effect was given to the proposed amendment immediately on tabling of the Bill in the National Assembly and General Sales Tax GST on all taxable supplies and activities as proposed to be increased was levied---Status of the declaration made under S. 3 of the Provisional Collection of Taxes Act, 1931 could not of a sub-legislation qua the Finance Act, which ultimately was to be passed in pursuance of the Finance Bill by the Majlis-e-Shoora (Parliament) under Art. 77 of the Constitution imposing increase in the levy of the sales tax---For protection of their Fundamental Rights, citizens could not be subjected to exploitation in terms of S. 3 of the Provisional Collection of Taxes Act, 1931 for the purpose of subjecting them to pay General Sales Tax GST on the taxable supplies in furtherance of any taxable activity---Any provision of an enactment, which was against the provisions of Art. 77 of the Constitution and infringed the Fundamental Rights of the citizens enshrined in Arts.9 & 24 of the Constitution by depriving them of their life or property without any proper legislation was tantamount to violation of Art.3 of the Constitution and the same could not be considered to be a legislative or a sub-legislative instrument for the purpose of imposing or increasing General Sales Tax GST pending passing of the Finance Bill (Money Bill) 2013-14 by the Majlis-e-Shoora (Parliament)---Section 3 of the Provisional Collection of Taxes Act, 1931 being contrary to Arts. 3, 9, 24 & 77 of the Constitution was unconstitutional and void---Section 4 of the said Act as a whole was unconstitutional being contrary to Art. 70 of the Constitution---Section 5 of the Provisional Collection of Taxes Act, 1931, did not lay down parameters for the purpose of refund of the recovered taxes to the consumers, as such, in absence of any workable mechanism, it was not enforceable in its present form---Rule 20(2)(c) of the Sales Tax Act (Special Procedure) Rules, 2007 was contrary to the Sales Tax Act, 1990, therefore, it was non-est and also violative of the provision of S. 4 of the said Act---Supreme Court directed that excess amount equal to 1% (17% - 16%) of the General Sales Tax GST recovered on the taxable supplies w.e.f. 13-6-2013 onwards, was refundable to consumers and concerned authorities shall deposit the same with the Registrar of the Supreme Court subject to passing of the Finance Bill (Money Bill), 2013-14 by or under the authority of the Majlis-e-Shoora; that if the sales tax imposed by the Majlis-e-Shoora was to be recovered with retrospective effect, the excess amount deposited with Registrar of the Supreme Court shall be paid to the Government, otherwise appropriate orders would be passed for its disbursement; that prices of essential commodities mentioned in the Sixth Schedule to the Sales Tax Act, 1990 had exorbitantly increased according to the media reports, therefore, Federal and Provincial Governments shall take action under Ss.6 & 7 of the Price Control and Profiteering and Hoarding Act, 1977 to keep the prices consistent as per the Sixth Schedule under S.13(1) of the Sales Tax Act, 1990, and that pending passing of the Finance Bill (Money Bill) 2013-14, sales tax shall be recovered from consumers on the taxable supplies at the rate prescribed under S.3 of the Sales Tax Act, 1990.

(b) Constitution of Pakistan---

----Art. 77---Tax, levy of---Scope---Levy of tax for the purpose of Federation was not permissible except by or under the authority of Act of Majlis-e-Shoora (Parliament)---Such legislative powers could not be delegated to the Executive authorities---Majlis-e-Shoora (Parliament)/ Legislature alone and not the Government/Executive was empowered to levy tax---Delegation of such power to the Government/Executive was for the purpose of implementation of such laws, which was to be done by framing rules, or issuing notifications or guidelines, depending upon the case, but in no case, authority to levy tax for the Federation was to be delegated to the Government/Executive.

Cyanamid Pakistan Ltd. v. Collector of Customs PLD 2005 SC 495; Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176; All Pakistan Textile Mills Associations v. Province of Sindh 2004 YLR 192 and Ittefaq Foundry v. Federation of Pakistan PLD 1990 Lah. 121 ref.

(c) Words and phrases---

---"Law"---Interpretation.

Gokula Education Foundation v. The State of Karnatka AIR 1977 Kant. 213 ref.

(d) Interpretation of statutes---

----Statute, constitutionality of---Examination of the constitutionality of a statute by a court---Scope---While examining the constitutionality of a statute, a court must exercise restraint, and efforts should be made to save the statute instead of destroying it.

Baz Muhammad Kakar v. Federation of Pakistan PLD 2012 SC 923 ref.

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

----S. 3.---Provisional Collection of Taxes Act (XVI of 1931), S. 3---Sales Tax Special Procedures Rules, 2007, R. 20 (2)(c), proviso---Constitution of Pakistan, Arts. 3, 9, 24, 77 & 184(3)---Constitutional petition under Art. 184(3) of the Constitution regarding sudden increase in prices of petroleum products due to increase in General Sales Tax---Federal Government/Executive increasing General Sales Tax (GST) from 16% to 17% with immediate effect on the value of taxable supplies by way of a declaration under S. 3 of Provisional Collection of Taxes Act, 1931, pending passing of the Finance Bill (Money Bill) 2013-14 in the Parliament---Increase in General Sales Tax (GST) imposed on Compressed Natural Gas (CNG) pending passing of the Finance Bill (Money Bill) 2013-2014 in the Parliament---Legality---By means of the Finance Bill (Money Bill) 2013-14, General Sales Tax (GST) was proposed to be increased from 16% to 17% by amending S. 3 of the Sales Tax Act, 1990 from 13-6-2013 on the value of taxable supplies made in course or furtherance of any taxable activity, but the notification issued by Oil and Gas Regulatory Authority (OGRA) clearly indicated that General Sales Tax [GST] was being charged on CNG on the increased rate of 26%---Such increased recovery was being made under the provision of R. 20(2)(c) of the Sales Tax Act Special Procedures Rules, 2007---Such recovery was absolutely contrary to S. 3 of the Sales Tax Act, 1990 as it had been sought to be amended in the Finance Bill (Money Bill) 2013-14, therefore, General Sales Tax (GST) at the increased rate could not be recovered unless so provided under the statute---Federal Government had no lawful authority to impose or recover General Sales Tax (GST) on CNG @ 26% with effect from 13-6-2013 until passing of the Finance Bill (Money Bill) 2013-14--- Under proviso to R. 20(2)(c) of the Sales Tax Special Procedures Rules, 2007, 9% GST in addition to the sales tax prescribed under S. 3 of the Sales Tax Act, 1990 imposed or recovered from the consumers on CNG was unconstitutional and contrary to Arts.3, 9, 24 & 77 of the Constitution as well as S.3 of the Sales Tax Act, 1990---Excess amount equal to 1%, i.e., 17% - 16%, of GST recovered on CNG w.e.f. 13-6-2013 onward was thus refundable to the consumers---Supreme Court directed that concerned authorities should deposit such excess amount with the Registrar of the Supreme Court subject to passing of the Finance Bill (Money Bill), 2013-14 by or under the authority of Majlis-e-Shoora (Parliament); that the Government should deposit 9% out of 26% of GST charged on CNG as per notification dated 13-6-2013 in the same manner; that if the sales tax imposed by the Majlis-e-Shoora was to be recovered with retrospective effect, the excess amount deposited with Registrar of the Supreme Court shall be paid to the Government, otherwise appropriate orders would be passed for its disbursement; that in respect of recovery of additional 9% GST on CNG, statement should also be filed on behalf of the Government showing the amount of GST so recovered from the consumers under proviso to R. 20(2)(c) of the Sales Tax Special Procedures Rules, 2007 on the value of CNG in addition to 16% General Sales Tax (GST) imposed under S. 3 of the Sales Tax Act, 1990 as such amount was also to be refunded to the consumers; that pending passing of the Finance Bill (Money Bill), 2013-14, sales tax shall be recovered from consumers on petroleum products and CNG at the rate prescribed under S. 3 of the Sales Tax Act, 1990, and that Oil and Gas Regulatory Authority (OGRA) shall issue revised notification fixing prices of CNG forthwith recovering sales tax @16% on taxable supplies till passing of Finance Bill (Money Bill), 2013-14 by the Majlis-e-Shoora.

M. Ikram Ch., Advocate Supreme Court for Petitioners (in Constitutional Petition No.33 of 2005).

Nemo for Petitioners (in Constitutional Petition No.34 of 2005).

Muneer A. Malik, Attorney-General for Pakistan Assisted by Faisal Siddiqui for Respondents (Federation of Pakistan).

Dil Muhammad Alizai, D.A.-G. and Raja Abdul Ghafoor, Advocate-on-Record for Respondents (Federation of Pakistan).

Dr. Rana M. Shamim, Advocate Supreme Court, Arshad Ali Chaudhry, Advocate-on-Record, Muhammad Aaqil, Member (Legal), Raza Baqir, Member and Ashfaq Tunio, Chief Sales Tax for Respondents (FBR).

Salman Akram Raja, Advocate Supreme Court, Saeed Ahmad Khan, Chairman, Abdul Basit, Law Officer and Ms. Misbah Yaqoob, JED(F) for Respondents (Ogra).

Ch. Akhtar Ali, Advocate-on-Record for Respondents (M/o Petroleum).

Nemo for M/o Finance.

Dilawar Khan, Dy. Director for M/o Climate change.

Nemo for OCAC.

Dates of hearing: 19th and 21st June, 2013.

2013 P T D 1952

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani and Muhammad Ather Saeed, JJ

NAEEM TRADERS and others

Versus

COLLECTOR OF CUSTOMS and others

Civil Petitions Nos. 410-L and 434-L of 2010, decided on 14th June, 2013.

(On appeal from the judgment dated 24-12-2009 passed by the Lahore High Court, Lahore in Custom Reference Nos. 30 and 35 of 2009).

Customs Act (IV of 1969)---

---Ss. 196, 194C, 3A & 4---Constitution of Pakistan, Art. 199 & 185(3)---Tax reference before High Court converted into writ petition and remanded for decision afresh---Legality---Supreme Court granted leave to appeal to consider whether in converting tax reference into writ petition and remanding the case for decision afresh the High Court had misconstrued the provisions of Ss. 194C, 3A & 4 of Customs Act, 1969; whether impugned judgment of the High Court had the effect of making said provisions of law redundant, and whether in absence of any question of law having been raised in the reference, could the same be entertained and converted into a writ petition.

Mian Abdul Ghaffar, Advocate Supreme Court for Petitioners.

Sh. Izhar-ul-Haq, Advocate Supreme Court for Respondents.

Date of hearing: 14th June, 2013.

2013 P T D 2022

[Supreme Court of Pakistan ]

Present: Mian Saqib Nisar and Muhammad Ather Saeed, JJ

Messrs Z&J HYGIENIC PRODUCTS (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE, SALES TAX GUJRANWALA and others

Civil Petitions Nos. 33-L to 35-L of 2011, decided on 19th June, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 40-A, 40 & 38---Constitution of Pakistan, Art. 185(3)---Alleged evasion of sales tax---Raid/search conducted by tax authorities without obtaining warrant from Magistrate---Legality---Confiscation of record and documents of tax-evader during raid---Tax authorities conducted a raid on premises of petitioner-company and took away manual as well as computer record and then issued a show cause notice for recovery of alleged evaded sales tax---Constitutional petitions filed before the High Court by petitioner-company and tax authorities were disposed of with the direction that superior courts were not the forum to adjudicate upon questions of fact by making thorough investigation and both the parties might contest their grievance before the adjudicating officer---Plea of petitioner-company that raid under S. 40 of Sales Tax Act, 1990 should be made after obtaining warrants from the Magistrate, and if raid was made under S. 40A of Sales Tax Act, 1990 reasons should be given by Tax Authorities as to why it apprehended that record would be removed; that no such reasons had been given by Tax Authorities in the notice given in the present case---Validity---Without mentioning reasons and plea of emergency for entry in the premises, raid by concerned authorities without taking permission from the Magistrate was illegal---Supreme Court granted leave to appeal to consider whether raids conducted under Ss. 38 & 40A of Sales Tax Act, 1990 were within the parameters specified by the Supreme Court in the judgments of (i) Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd. 2005 PTD 1933, (ii) Collector of Sales Tax etc. v. Messrs Food Consults (Pvt.) Ltd. and Messrs Diplex Beauty Clinic 2007 PTD 2356, and (iii) Federation of Pakistan through Ministry of Finance Islamabad v. Master Enterprises (Pvt.) Ltd., and others 2003 PTD 1034; and whether documents seized during an illegal raid could be used against the alleged tax-evader in any manner to his disadvantage.

Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd. 2005 PTD 1933; Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) Ltd. and Messrs Diplex Beauty Clinic 2007 PTD 2356 and Federation of Pakistan through Ministry of Finance Islamabad v. Master Enterprises (Pvt.) Ltd., and others 2003 PTD 1034 ref.

Mian Abdul Ghaffar Advocate Supreme Court and Mahmudul Islam, Advocate-on-Record for Petitioners.

Mian Yousaf Omer, Advocate Supreme Court for Respondent No.1.

Date of hearing: 19th June, 2013.

2013 P T D 513

[Supreme Court (AJ&K)]

Before Muhammad Azam Khan C.J., Raja Saeed Akram Khan and Sardar Muhammad Sadiq Khan, JJ

DEPUTY COMMISSIONER INLAND REVENUE and another

Versus

Messrs NEELUM JHELUM HYDRO POWER COMPANY (PVT.) LTD. through M. Mohsin Sheikh and 5 others

Civil Appeal No.75 and Civil Miscellaneous No.175 of 2012, decided on 6th July, 2012.

(On appeal from the judgment of the High Court dated 29-6-2012 in Writ Petition No.1280 of 2012).

Income Tax Ordinance (XLIX of 2001)---

----Ss.148 & 162---Azad Jammu and Kashmir High Court (Procedure) Rules, 1984, Rr.33 to 38---Seizure of the accounts of the taxpayer/ company---Matter related to the payment of income tax on imported Tunnel Boaring Machine---Deputy Commissioner Inland Revenue, ordered for seizure of the accounts of the company with the banks---Taxpayer company had prayed that assessment order under S.162, of Income Tax Ordinance, 2001, be declared to be without lawful authority and of no legal effect---High Court disposed of the writ petition in limini and granted part of relief---Validity---Writ petition could not be finally disposed of without first admitting the same for regular hearing, providing an opportunity to respondents for filing written statements/objections, documents and affidavits etc. and hearing the arguments---High Court in the present case, had passed order without complying with Rules 33 to 38 of Azad Jammu and Kashmir High Court (Procedure) Rules, 1984---Due to order of seizure of accounts of the taxpayer company by banks, a hardship had been created for the company; and if said seizure order of accounts would remain in operation, a heavy loss would occur to the National Exchequer---High Court, in circumstances, was right in exercising the inherent powers for suspending the order of seizure of the account of the company till they approach the appropriate forum---Such power always vested in every court for doing the complete justice---Supreme Court declared that writ petition could not be finally disposed of without first admitting same for regular hearing issuing notice to other party, seeking objections/written statements, but in peculiar circumstances of the case, the order of the High Court, whereby the notice for seizure of accounts of the company was ordered to remain in abeyance, would remain operative till the time as granted by the High Court.

Messrs Raja Autocars v. Zonal Manager and 2 others Writ Petition No.62 of 1999 decided on 21st January, 2000; Muhammad Inayatullah Cheema v. Sardar Ali Raza Masood Qazilbash 2002 PTD 1195 and Sanofi Aventis Pakistan Limited v. Province of Sindh and others PLD 2009 Kar. 69 ref.

Azad Government and others v. Meher-un-Nisa and others Civil Appeal No.65 of 2012 decided on 15th June, 2012 rel.

Ch. Muhammad Afzal Advocate for Appellants.

Sajid Hussain Abbasi and Sardar Abdul Razik Khan Advocate for Respondents.

Date of hearing: 4th July, 2012.