PTD 2015 Judgments

2015 P T D 2292

[Board of Revenue Punjab]

Before Waheed Akhtar Ansari, Member Judicial-III

Mst. SANA HUSNAIN

Versus

The STATE

ROR No.223 of 2014, decided on 29th October, 2014.

Punjab Agricultural Income Tax Act (I of 1997)---

----S. 4---Punjab Agricultural Income Tax Rules, 1997, Rr.3(2)(ix) & 12---Agricultural Income Tax Rules, 2001, R.5---West Pakistan Land Revenue Act (XVII of 1967), S. 164---Assessment of agricultural income tax---Failure to deposit amount of assessed amount before filing appeal---Claim of the petitioner was that notice issued by Assessing Authority to him for filing of income return of total agricultural income for financial years concerned, was not in his knowledge and the Assessing Authority without giving him opportunity of hearing, assessed income tax---Appeal filed by petitioner against Assessing Authority, was dismissed in limine on the sole ground that it was mandatory under R.3(2)(ix) of the Punjab Agricultural Income Tax Rules, 1997, to deposit the total assessed amount before filing, appeal, Which was not so deposited---Petitioner, having failed to fulfil his lawful obligation, Collector issued a notice in terms of S.4 of Agricultural Income Tax Act, 1997---Petitioner, again having failed to respond such notice, Collector assessed the amount of Agricultural Income Tax in terms of R.12 of Punjab Agricultural Income Tax Rules, 1997---Validity---Petitioner, was required to deposit assessed amount up till specified date, but he instead of responding to such notice, opted to file appeal, which was dismissed, as petitioner had failed to comply with mandatory provisions of law---Appeal was rightly dismissed by Appellate Authority, in circumstances.

Sameer Ijaz for Petitioner.

2015 P T D (Trib.) 30

[Customs Appellate Tribunal]

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

BABAR WAHEED

Versus

FEDERATION OF PAKISTAN through Secretary, Federal Board of Revenue, Government of Pakistan, Islamabad and 3 others

Customs Appeal No.K-286 of 2008, decided on 9th December, 2013.

(a) Administration of justice---

----Proper place of procedure in any system of administration of justice is to help and not to thwart the grant of their rights to people---Technicalities have to be avoided unless essential to comply on grounds of public policy.

PLD 1963 SC 382 rel.

(b) Interpretation of statutes---

----Statute is understood to be directory when it contains matter merely of direction, but not if the directions are followed by an express provision to the effect that in case of default to follow said provision, action shall be null and void.

Niaz Muhammad Khan v. Mian Fazal Raqib PLD 1974 SC 134 rel.

(c) Customs Rules, 2001---

----R.298---Duty and tax remission for export scheme---Approval for availing benefit---Procedure---Person desirous of availing the facility of Duty and Tax Remission for Export Scheme (DTRE) submitted an application for obtaining DTRE approval on the basis of specific export or supply contract or order, Collector, who, after going through the application and recommendations of the processing authorities approves the application for import of goods to be utilized in the manufacture of goods for export without payment of leviable Customs duty and taxes on the said item notified in the Pakistan Customs Tariff.

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

----Ss.32(1)(2) & 32(a)---Customs Rules, 2001, Rr.298 & 307-E(4)---Mis-declaration---Act contrary to the promise---Doctrine of promissory estoppel, benefit of---Scope---Appellant obtained approval of Duty and Tax Remission for Export Scheme (DTRE) for the importation of zinc for the manufacturing of sanitary fitting for export---Appellant imported zinc but exported copper coated wire instead of sanitary fitting---Customs authorities found the appellant guilty of misusing and abusing the facility of DTRE and causing loss to public exchequer of regulatory duty---Appellant was served with show cause notice on account of mis-declaration and fiscal fraud---Additional Collector of Customs through impugned Order in Original ordered for confiscation of seized goods, imposed penalty and also recommended for cancellation of DTRE approval along with initiation of recovery proceedings---Appeal filed by appellant against the impugned order in original was dismissed---Contention of the appellant was that he was given DTRE approval by the authorities, therefore impugned orders were illegal as he was protected under the doctrine of promissory estoppel---Validity---Appellant submitted application with the Collector who notified the approval as per which the appellant was to import zinc for manufacture and export of Sanitary fitting---Appellant, in his application and approval, made a statement and promise to import the goods mentioned in the application and likewise to export the goods mentioned in DTRE approval---Appellant imported the goods as declared in application but exported the goods namely copper coated wire to which he was not permitted---Appellant was duty bound to adhere to the promise made in the application of exporting sanitary fitting manufactured from alloy comprising of copper and zinc---Copper coated wire could not be termed as sanitary fitting even through a figment of imagination, therefore the act of appellant was in derogation of the DTRE approval and amounted to mis-declaration and fiscal fraud---Doctrine of promissory estoppel was infact squarely applicable on the appellant as he was not allowed to export the goods contrary to the promise made in the DTRE approval---Taking shelter behind the doctrine of promissory estoppel was misplaced as it was for the appellant to adhere to his declaration/promise and not for the authorities in any manner---Appeal was dismissed.

PLD 1991 SC 546; AIR 1980 SC 1285; AIR 1986 SC 806 and 1986 SCMR 916 distinguished.

Army Welfare Sugar Mill Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

(e) Estoppel---

----Promissory estoppel---Doctrine of promissory estoppel is based on equitable principles.

Army Welfare Sugar Mill Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

G.A. Khan for Appellant.

Allauddin Paracha for Respondent.

Date of hearing: 2nd July, 2013.

2015 P T D (Trib.) 611

[Customs Appellate Tribunal]

Before Khalid Mahmood, Member Technical

COLLECTOR OF CUSTOMS through Assistant Collector

versus

Messrs DECENT AUTOS and another

Customs Appeal No. K-894 of 2014, decided on 7th November, 2014.

Customs Act (IV of 1969)---

----Ss. 15, 17, 32, 79, 80, 156(1)(9) & 194-A---Trade Marks Ordinance (XIX of 2001), Ss.53, 54, 55, 56 & 57---Confiscation of imported goods on allegation of mis-declaration and infringement of trade mark---Importer, filed Goods Declaration in respect of imported goods; determined his liability of payment of applicable duties and taxes and sought clearance under S.79(1) of Customs Act, 1969---Goods Declaration of the importer was selected for scrutiny in terms of S.80 of Customs Act, 1969---Examination report revealed that importer allegedly had imported an item for which Trade Mark Registration existed in the name of a different company---Consequently, imported goods were confiscated in terms of S.17 & S.156(1)(9) of Customs Act, 1969 by Adjudicating Authority vide order-in-original---Appellate Authority allowed appeal of importer, set aside order-in-original declaring the same to be null and void; and Customs---Validity---Company in its letter/complaint, did not allege any infringement of its trade mark rights; rather highlighted the import in question to be "parallel import"---Such complaint was not a bona fide complaint, nor it should provide occasion to the Customs Authorities to invoke S.15 of the Customs Act, 1969 in isolation or exclusion of other statutory requirements---Said letter/complaint by any account did not appear to be in consonance with the parameters, laid down under Ss.53 & 54 of Trade Marks Ordinance, 2001---No case of infringement of trade mark rights had been made out---Goods imported were not associated with any mis-declaration, or any other offence under the Customs Act, 1969---Impugned order-in-appeal, being correct, warranted no interference, in circumstances.

Abdul Ghani Soomro for Appellant.

Nadem Ahmed Mirza for Respondents.

Date of hearing: 6th November, 2014.

2015 P T D (Trib.) 637

[Customs Appellate Tribunal]

Before Ch. Muhammad Tariq, Chairman/Member Judicial, Adnan Ahmed, Judicial Member-II and Khalid Mahmood Technical Member

Messrs NATIONAL LOGISTIC CELL

versus

COLLECTOR OF CUSTOMS and others

Customs Appeals Nos.K-146; 148 to 196, K-278 to 288 K-526 to 549, K-457, K-559 of 2012 and K-2199 to 3097 of 2013, decided on 12th August, 2014.

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

----Ss.2(s), 32(1), 32(2), 32(A), 79, 121, 127, 128, 129, 192 & 209---Customs Rules, 2001, Rr. 470 to 484 & 600(vi)---Pak-Afghan Transit Trade Agreement, 1965---Smuggling---Misappropriation of goods---Different goods cleared through different goods declarations were checked, loaded on the National Logistic Cell---Containers were sealed in presence of Customs authorities, clearing agents, drivers, co-drivers, conductors and other concerned---Consignments were handed over to National Logistic Cell who were legally bound to ensure safe and secure transportation unto the destination because it was the sole responsibility of the National Carrier to safely transit the goods across Pakistan through designated routes i.e. either via Spin-Boldak (Chaman) or the Torkham borders---Verification from data provided by the Afghanistan Government revealed that all the consignments did not cross over into Afghanistan giving prima facie evidence to the fact that goods were pilfered, misappropriated/smuggled enroute and disposed of in Pakistan by the National Logistic Cell in league with importers and border clearing agents---Declarations statements and documents submitted to customs at the port of clearance and thereafter for the transit consignment were incorrect and false, designed to serve the mere purpose of conceiving and committing the fraudulent activity of smuggling and revenue theft in the garb of transit cargo---Revenue alleged that National Logistic Cell the authorized carrier, had actively facilitated smuggling and fraud in violation of their undertaking for safe transportation of the goods---Carrier, importers and agents had jointly and severally pilfered/smuggled and disposed of the goods in Pakistan in gross violation of the provisions of law and defrauding the Government exchequer of the legitimate duties and taxes---Appellant, National Logistic Cell, contended that National Logistic Cell was not legally, morally or contractually bound to transit goods from Chaman to Afghanistan---No evidence of any violation of Rules had been laid against the appellant---National Logistic Cell could not be held liable on mere presumption that since the goods did not reach Afghanistan, the container was not transported by the National Logistic Cell and pilfered enroute; and order passed was nullity in the eyes of law as the customs clearing security unit was responsible for security from the port of entry to port of exist---Goods were loaded in the National Logistic Cell containers at Karachi port in presence of Customs Officers, clearing agents, drivers, co-drivers, conductors and other concerned, sealed and were handed over to the National Logistic Cell---No documentary evidence or other evidence was available on the files that the goods reached the destination---Verification made from the data provided by Afghanistan Government also confirmed that consignments did not cross over into Afghanistan---National Logistic Cell actively facilitated the misappropriation, pilferage and smuggling of transit goods for their own gain---No cross border certificate as required under the law were produced by the National Logistic Cell at any stage of proceedings---Computerized data maintained for sealing, de-sealing of Afghan Transit Trade containers showed that the consignments were not de-sealed at its destination---Importer was not a Pakistani citizen but he had been granted national treatment under the Pak-Afghan Transit Trade Agreement of 1965, he should not be discriminated vis-à-vis importers of Pakistani citizenship---This privilege was subject to observance of economic and legal sovereignty of Pakistan within its borders---Importing goods in garb of Transit Trade and then disposing them of within Pakistan not only violated the letters of the Pak-Afghan Transit Trade Agreement of 1965, but was also an assault on Pakistani's economy---Crime was committed within Pakistan's territory; all the committers, abettors and beneficiaries of the crime were accountable here---Appeals were without merit and no interference was called for by the Appellate Tribunal---National Logistic Cell and border agents were individually and collectively responsible for making payment determined by adjudicating in all the cases.

PLD 2008 SC 591 rel.

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

----S.194-A---Appeal to Appellate Tribunal---Limitation---Appeals were barred by limitation---Condonation of delay---Matter being highly sensitive and of national importance, delay in filing appeals was condoned by the Appellate Tribunal.

PLD 2008 SC 591 rel.

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

----S. 2(s)---"Smuggling"---Burden of proof---Misappropriation, pilferage and smuggling of transit goods---National Logistic Cell/ appellant contended that customs authorities were supposed to prove the place where the goods were smuggled, misappropriated or pilfered---Validity---Objection had no footing, because the National Logistic Cell had verbally as well as through documents had admitted a number of times, that the goods were loaded on the containers, the containers were sealed and handed over to the National Logistic Cell for further transportation to the destination---Such consignments did not reach the destination---Onus to prove that the National Carrier delivered the goods at the destination shifted on the National Logistic Cell because definitely the goods were misappropriated but the containers, trucks, the drivers, co-drivers, conductors and their other associates were in Pakistan; they were neither smuggled nor kidnapped--None of the said persons was ever produced by the National Logistic Cell before the Tribunal or forums below.

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

----S.2(s)---Smuggling---Misappropriation of goods---National Logistic Cell/appellant contended that goods were misappropriated from Pakistan Railways during transit but no penal action was taken against Pakistan Railways; and National Logistic Cell be given the same treatment---Such statement of National Logistic Cell amounted to admission.

Shahnawaz for Appellants.

Shahid Ali Abbasi, D.C., Imtiaz Hussain A.O., Shakeel Ahmed A.O., Khan Muhammad Sarohi, Dil Khurram Shaheen for Respondents.

Date of hearing: 4th August, 2014.

2015 P T D (Trib.) 687

[Customs Appellate Tribunal]

Before Ch. Muhammad Tariq, Chairman/Member Judicial and Khalid Mahmood, Member Technical

NIAZ MUHAMMAD

versus

DIRECTOR OF INTELLIGENCE AND INVESTIGATION, FBR, QUETTA

Customs Appeal No.Q-402 of 2012, decided on 12th August, 2014.

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

----S.194-B(2)---Orders of Appellate Tribunal---Application for rectification of order on the ground of error of excess assumption of jurisdiction---Validity---Remedy of review was not provided in Customs Act, 1969, therefore, after signing the judgment/order and announcing the same that could not be re-opened through a rectification application---Judgment could not be re-opened---Judgment signed and announced could not be declared annulled, set-aside or modified by means of rectification under S.194-B(2) of the Customs Act, 1969---Application being without any substance was dismissed by the Appellate Tribunal.

2003 CLC 1189 and Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94 rel.

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

----S.194-B(2)---Rectification of order of Appellate Tribunal---Scope---Rectification meant "to make a correction, rectification was confined to exercise the powers to correct only the clerical or arithmetical mistake in the judgment/order which had occurred due to accidental slip or omission---Definition of "rectification" could not be stretched nor its scope could be widened to an extent thereby defeating the manifest intent of the legislature---Once court/judge signs and pronounce judgment, the court ceases to exercise jurisdiction in the matter having become functus officio.

2003 CLC 1189 rel.

(c) Review---

----Scope---When a judgment is signed and announced, the aggrieved party may assail such order/judgment before the higher courts in appeal/revision or may file a review application in the same court, if the remedy of review had been provided in such statute because right of review is a substantive right and is always a creation of the relevant statute on the subject.

(d) Review---

----Scope---Review is proceedings which exist by virtue of statute; it is in the nature of new trial of the issue, previously tried between the parties and cause of action being brought into court again for trial by a new petition.

Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94 rel.

Sadbar Jan for Appellant.

None for Respondent.

Date of hearing: 11th August, 2014.

2015 P T D (Trib.) 694

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member Judicial-II

Messrs CLASSIC TRADING CORPORATION, KARACHI

versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and another

Customs Appeal No.K-681 of 2014, decided on 8th September, 2014.

Customs Act (IV of 1969)---

----Ss. 32(1) (2), 79(1) & 156(1) (14)---Sales Tax Act (VII of 1990), S.33---Income Tax Ordinance (XLIX of 2001), S. 148---Qanun-e-Shahadat (10 of 1984), Art. 73---S.R.O. No. 499(I)/2009 dated 13-6-2009---False statement, error etc.---Importer was charged on the ground that he had mis-declared the origin of goods and attempted to clear the goods on lower value for evading legitimate duty and taxes---Importer contended that there was no mis-declaration of origin in presence of certificate of origin issued and duly certified by the China Council for the Promotion of International Trade and charge of mis-declaration of origin was not viable; that when a charge of mis-declaration was alleged then material terms of charge were to be proved by the prosecution and that mere making a statement did not qualify the charge under the provisions of S.32 of the Customs Act, 1969---Validity---Importer produced Certificate of origin and department failed to prove the same as non-genuine---Department had enough time to get it verified which had not been done and no plausible explanation for the same had been brought on record---Certificate in unequivocal terms denoted the country of origin as China and there was no doubt that the goods had been imported from China and bill of lading was also issued from shipping company of China---Provisions of Art. 73 of the Qanun-e-Shahadat, 1984 stated that notwithstanding anything contained therein, a court shall presume within the meaning of that Art. that a document specified in Part-I of the Schedule to the Qanun-e-Shahadat had been duly made by or under the appropriate authority, was so made and that the statements contained therein were accurate---Accuracy of Commercial documents produced in support of country of origin was to be presumed and it will be against the principles of law and natural justice to discard commercial documents merely on the basis of unspecific and vague examination report of Customs---Violation of the provisions of Qanun-e-Shahadat, 1984 applicable for the purpose of evidence had been committed by the Department---Adjudicating officer had failed to scrutinize the certificate of origin issued by China Council for Promotion of International Trade, shipment of goods and bill of lading by a shipping company of China---Lower forum also failed to apply its mind inasmuch as that the available evidence was not given due consideration---Appeal was allowed with certain modifications and also remitted the redemption fine and penalty---Appellant would also be entitled for "delay and detention certificate", if so required.

2003 PTD 2090; 2005 PTD (Trib.) 1321; 2005 PTD (Trib.) 1826; 2006 PTD 651; Customs Appeal No.412 of 2001 and Special Customs Reference Application No.189 of 2012 rel.

Farooq Talib Hussain for Appellant.

Abdul Aziz, A.O., for Respondents.

Date of hearing: 19th August, 2014.

2015 P T D (Trib.) 753

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member Judicial-II

Messrs NIMIR INDUSTRIAL CHEMICALS LTD., SHEIKHUPURA

versus

COLLECTOR OF CUSTOMS (APPEALS), KARACHI and 2 others

Customs Appeal No.K-680 of 2104, decided on 3rd October, 2014.

Customs Act (IV of 1969)---

----Ss. 15, 16, 17, 82, 179(3), 193 & 194-A---Failure of importer to get clearance of imported goods from the port within prescribed period---Order of confiscation of goods---Appeal---Limitation---Importer having failed to get clearance of imported goods from the Port within prescribed period, Adjudicating Authority, vide order-in-original confiscated the goods---Validity---Appeal filed by importer against order of Adjudicating Authority, which under S.193(3) of Customs Act, 1969, was to be decided by Appellate Authority within 120 days from the date of filing of appeal, was decided after 11 months and 8 days i.e. 344 days---Order-in-appeal passed by Appellate Authority below, was illegal void and against the settled law and was liable to be set aside---Importer, could not be refused to get released the goods against payment of duty and taxes---Appeal filed by importer was allowed by the Appellate Tribunal with the directions to importer to file Goods Declaration, get the goods released after payment of duty and taxes, in circumstances.

2006 PTD 340; PTCL 2005 CL 848 and Javed Hassan v. Central Board of Revenue 1975 Law Notes Lahore 85 ref.

M. H. Awan for Appellant.

Sidiq Zia, A.O., for Respondent.

Date of hearing: 22nd September, 2014.

2015 P T D (Trib.) 818

[Customs Appellate Tribunal]

Before Ch. Muhammad Tariq, Chairman, Adnan Ahmed, Member Judicial-II and Khalid Mahmood, Member Technical

Messrs ASLAM NIAZI and others

versus

ADDITIONAL COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE PaCCS and others

Customs Appeals. Nos. K-344 to 350, K-392 to 398, 579 to 609, K-954 to 966, K-1085, 1086, 1088 to 1097, K-1232, K-1242 to 1249, K-1314 to 1327, K-1383 to 1392 of 2011 and K-709 and 710 of 2013, decided on 20th October, 2014.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 32-A, 79, 80, 156, 178, 194-A & 194-B---Customs Rules, 2001, R. 423(XXIV)---Notification S.R.O. 450(I)/2001, dated 18-6-2001---Clearing consignment of imported goods against fake and fictitious Goods Declaration---Penal action---Directorate General of Intelligence and Investigation-FBR, in its contravention report, had reported that importer, cleared consignment against fake and fictitious Goods Declaration without payment of duty and taxes leviable thereon---Validity---Preliminary investigation transpired that neither Goods Declaration was filed by the importer, nor duty and taxes were paid---Accused importer with active connivance with other associates had indulged themselves into the fraudulent and illegal removal of consignment by abusing the Pakistan Customs Computerized System (PaCCS), had defrauded the State Exchequer in violation of relevant provisions of Customs Act, 1969---Importer and other persons were established to be liable for action for the offence and violation of Ss.16, 18, 32, 32A, 79, 80, 156 & 179 of Customs Act, 1969---Amount of duties and taxes had not been ascertained, as the complete description of imported goods were not available---Penal action under various provisions of the Customs Act, 1969 had been recommended in the contravention report---Findings, conclusion and order in respect of the role played by each accused and his liability had fully been given---Feeling aggrieved from the order-in-original, passed by Adjudicating Authority accused/appellants filed appeal, which was dismissed by Appellate Authority---Appellants, Terminal Operators, not only had violated the Customs Laws and Rules, but were also guilty of gross violation of Pakistan Customs Computerized System (PaCCS)---Objection of appellants side about the deposit of duty demanded or penalty levied under S.195-B of Customs Act, 1969, was not sustainable---No one had denied the illegal removal of containers from port area on the basis of forged Goods Declarations, but, every one tried to shift the burden of guilt on the other---Appellate Authority, in circumstances, had rightly brought in operation, the provisions of S.195-B of Customs Act, 1969---Objection raised by appellants in relation to the show-cause notice, was not sustainable in the eyes of law, because limitation would not run in cases of fiscal fraud---Present case was of a peculiar nature; and after disclosure of offence, the matter was interrogated by the authorities---Number of departments, including foreign shipment companies were contacted for verification purposes---Conduct of appellants/accused persons, also remained, non-co-operative, causing the delay in issuance of show-cause notice which was not fatal---Guilt of accused persons having fully been proved without any shadow of doubt, no interference was called for by the Appellate Tribunal---Appeals being without merits, were dismissed, in circumstances.

Ali Almani, Sardar Muhammad Ishaque and Fahad Zia for Appellants.

Kausar Hussain, A.O., Rana Gulzar S.I.O., Ghulam Yasin, P.A., Mohsin Imam, Khalil M. Dogar and Zafar Iqbal, Superintendent for Respondents.

Date of hearing: 24th September, 2014.

2015 P T D (Trib.) 944

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II) and Khalid Mahmood, Member (Technical-I)

Messrs AL-KHIDMAT FOUNDATION (PAKISTAN), LAHORE

versus

ADDITIONAL COLLECTOR OF CUSTOMS-IV

Customs Appeal No.K-25 of 2013, decided on 15th May, 2014.

Customs Act (IV of 1969)---

----Ss.16, 32(1)(2) & 156(1)---Import and Export (Control) Act (XXXIX of 1950), Preamble---Customs General Order No. 12 of 2002---Power to prohibit or restrict importation and exportation of goods---Import of ambulance---Confiscation of ambulance on the ground that stretcher, fire extinguisher and first aid box were lying in loose condition inside the ambulance and were not found fixed and other requisite facilities were not fixed therein---Vehicle in question did not fall within the definition of "ambulance" and by implication had to be treated as 'used vehicle', which was un-importable being hit by Cl.3 of Appendix-E of the Import Policy Order---Validity---All the eight facilities outlined in the Customs General Order No. 12 of 2002 had been found available within the imported vehicle as per the examination report---Examination report did not mention that three out of the total eight items lying in the vehicle were not placed at their appropriate/fixed points---Even if that was the case, the insistence by the Customs that all the items/facilities described had to be fitted amounted to stretching the interpretation of Customs General Order No. 12 of 2002 to unreasonable limits---As a matter of fact except for three, rest of the provisions had been found placed within the vehicle at their appropriate places---Only three items namely stretcher, fire extinguisher and first aid box were lying within the vehicle in what the Order-in-Original describes as lying in 'loose condition'---Presence of three items in 'loose condition' within the ambulance would not disentitle the treatment admissible to an ambulance---Order-in-Original was set aside by the Appellate Tribunal and appeal was allowed.

Nadeem Mirza, Consultant, for Appellant.

Sanaullah Abbasi, Appraising Officer for Respondent.

Date of hearing: 7th May, 2014.

2015 P T D (Trib.) 999

[Customs Appellate Tribunal]

Before Chaudhary Muhammad Tariq, Chairman and Khalid Mahmood, Member Technical-I, Messrs SHAIKH PIPE MILLS

versus

COLLECTOR OF CUSTOMS (ADJUDICATION-II) and another

Customs Appeal No.K-647 of 2013, decided on 28th October, 2014.

Customs Act (IV of 1969)---

----Ss. 18, 19, 27(3), 32, 156(1), Clauses (1)(10-A) & 194-A---Customs Rules, 2001, Rr.351 & 359---Short landed goods---Levy of customs duty, taxes and penalties---Exemption---Wastage---Determination of---Exemption claimed by importer on alleged "short landed goods" was refused by the Customs Authorities---Validity---Trust had verified the short landing of goods---Under S.18 of the Customs Act, 1969, customs duties and taxes, could be imposed on goods actually arrived in the territorial waters of Pakistan, and not otherwise---No mala fide was noticed on the part of importer, who had been furnishing the prescribed Appendix-IV every month to Customs Authorities, in which short landing of material, and percentage of waste, were declared and claimed---Customs duties and taxes, would not be recovered on short landed goods as verified/certified by the Port Trust in their weightment certificate---Impugned penalty imposed on importer, was unwarranted---Importer had failed to adhere to the requirement of short landing notices, as prescribed under R.359 of the Customs Rules, 2001---Such though was a procedural error, but was to be care of in the information furnished by importer in the rest of the required documentation (Appendix-IV)---Penalty could be imposed on importer under S.156 of the Customs Act, 1969, but was let off with warning to the importer to be careful in future---Appeal to that extent was allowed---Importer claimed process wastage at 10% in case of imported goods, but importer had not produced analysis certificate---Case was remanded to Collector of Customs (Adjudication), for determination of wastage, with direction to re-determine it in consultation with relevant authorities, within three months---Importer would be required to pay the duties and taxes, if any, resulting from the re-determination of wastage---In absence of any mala fide on the part of importer, penalty imposed, was remitted.

Akbar Hussain v. West Punjab Province PLD 1954 Lah. 188; Fazal Qdir's Case PLD 1963 SC 486, 423; Assistant Collector of Customs v. Khyber Electric Mfg. Co. Ltd. 2001 SCMR 838; PLD 2005 AJ&K 5; East and West Steamship Company v. The Collector of Customs PLD 1976 SC 618 and Lahore Textile and General Mills Ltd. v. The Collector of Customs, Lahore PTCL 1999 CL 473 ref.

Imran Javed, Consultant and Imran Iqbal for Appellant.

Ali Waheed Khan, Deputy Collector and S.M. Ilyas, A.O. for Respondents.

Date of hearing: 24th September, 2014.

2015 P T D (Trib.) 1064

[Customs Appellate Tribunal]

Before Chaudhry Muhammad Tariq, Chairman

Messrs ABDULLAH TRADERS, GUJRANWALA and others

versus

COLLECTOR OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeals Nos. K-13 to 101 of 2014, decided on 28th October, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 26, 26-A, 32, 156(1), Cl.(14) & 194-A---Value of imported goods---Determination---Failure to apply valuation ruling---Effect---Importers, allegedly imported and cleared Goods Declaration, without proper application of Valuation Ruling, which tantamounted to the mis-declaration of the value of imported goods---Short levied amount was enforced, and penalty was imposed on the importers for violation of law---Validity---Value of the imported goods was to be assessed on the basis of 90 days prior to the import, or within 90 days after import of the goods---Impugned imported goods were imported much after the expiry of impugned valuation ruling---Valuation Authorities, were duty bound to justify the failure to issue fresh advice, or to record reasons to maintain the existing valuation advice---Purpose of S.25 of Customs Act, 1969, was to bring a system based on mutual trust and harmony so that particulars of import be declared truly---Valuation Ruling applied to consignments of the importers which had expired, being non-existing, impugned orders passed by Customs Authorities, were set aside.

Aqeel Ahmed for Appellant.

Agha Jamshed Ali, A.O., for Respondents.

Date of hearing: 27th October, 2014.

2015 P T D (Trib) 1090

[Customs Appellate Tribunal]

Before Chaudhry Muhammad Tariq, Chairman

MUHAMMAD SHAFI

versus

COLLECTOR OF CUSTOMS, MCC, ISLAMABAD and others

Miscellaneous Application No. 9/CU/IB of 2013, decided on 7th July, 2014.

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

----Ss. 194-B & 17---Confiscation of vehicle---Application for rectification of Tribunal's order---Scope---Applicant having failed to produce any document to substantiate payment of duty/taxes levied against vehicle recovered from him, Adjudicating Authority vide order-in-original confiscated the vehicle; and appeal filed by applicant against order-in-original was dismissed by the Tribunal---Applicant filed application praying that said order be rectified; and order of confiscation be set aside; and vehicle be released to him unconditionally---Rectification, would mean to make a correction, and the Tribunal would confine itself to exercise the powers to correct only the clerical or arithmetical mistake in such order/judgment which had occurred due to accidental slip or omission---Rectification, could not be stretched nor its scope could be widened to an extent thereby defeating the manifest intent of the Legislature---Once court/judge signed and pronounced judgment, thereafter, court would cease to exercise jurisdiction in the same matter as court would become functus officio---When a judgment was signed and announced, aggrieved party could assail impugned order/judgment before the higher courts in appeal, revision, or could file a revision application in the same court, if the remedy of revision had been provided in the relevant statute as right of revision was a substantive right, and was always a creation of statute on the subject---Except said remedies, a previous judgment, could not be re-opened---Remedy of revision, having not been provided in Customs Act, 1969, after signing the judgment/order, and announcing, same could not be reopened through a rectification application---Judgment signed and announced, could not be annulled, set aside any modified by means of an application for rectification under S.194-B of the Customs Act, 1969---Application, was dismissed, in circumstances.

2003 CLC 1189 rel.

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

----S. 114---Review---Meaning and scope---Review was proceeding which existed by virtue of statute---Revision, was in the nature of new trial of the issue, previously tried between the parties and cause of action having been brought to the court again for trial by a new petition.

Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94 rel.

Sikandar Naeem Qazi for Applicants.

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

2015 P T D (Trib.) 1183

[Customs Appellate Tribunal]

Before Chaudhary Muhammad Tariq, Chairman

JAVED KHAN and others

versus

SUPERINTENDENT CUSTOMS PREVENTIVE, MCC, ISLAMABAD and others

Appeal No.2/CU/IB of 2012, decided on 30th June, 2014.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 168, 171 & 194-A---Seizure and confiscation of vehicle alleged to be smuggled---Adjudicating Authority vide order-in-original, outrightly confiscated vehicle in question on allegation that same was smuggled---Appellant, who claimed to be bona fide purchaser of vehicle filed appeal against order-in-original---Two Forensic Science Laboratories, after examination and re-examination, confirmed that chassis of vehicle in question was cut, welded and refitted---Vehicle in question was fully proved to be smuggled one, which was got registered after changing its chassis number through cut and weld---Appellant, who could not prove himself to be bona fide purchaser of vehicle in question, had failed to point out any illegality or infirmity in impugned orders---Appeal against said orders being without merits, was dismissed, in circumstances.

Malik Waqar Mehmood Awan for Appellant.

Yawar Nawaz AC/DR for Respondent.

2015 P T D (Trib.) 1214

[Customs Appellate Tribunal]

Before Chaudhry Muhammad Tariq, Chairman

Malik ASHIQ HUSSAIN

versus

COLLECTOR OF CUSTOMS, MCC, ISLAMABAD and others

Appeal No.9/CU/IB of 2012, decided on 17th July, 2014.

Customs Act (IV of 1969)---

----Ss 16, 17, 168, 193 & 194-A---Seizure and confiscation of vehicle---Vehicle having cut and welded chassis, was intercepted from appellant who claimed to be owner thereof---Appellant could not produce any document to substantiate payment of duty/taxes leviable against said vehicle---Vehicle was detained for requisition of the import documents and verification thereof and notice was also served upon the appellant---Forensic Science Laboratory, after Chemical/Laboratory test, intimated that the chassis number frame of vehicle had been cut, and other iron piece, had been welded on its chassis number place which had confirmed that vehicle was brought unlawfully into the country, without payment of duty and taxes levied thereon---Adjudicating Authority, vide order-in-original outrightly confiscated the vehicle---Appellate Authority dismissed appeal against order-in-original---Validity---Appellant, could not point out any illegality in the impugned orders, appeal, which otherwise was time barred, was dismissed, on merits and limitation, in circumstances.

2005 PTD 712; 2003 PTD 2594 and 2010 PTD 1418 ref.

Zafar Mahmood Mughal for Appellant.

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

2015 P T D (Trib.) 1301

[Customs Appellate Tribunal]

Before Chaudhry Muhammad Tariq, Chairman

S.S. CORPORATION

versus

ADDITIONAL COLLECTOR OF CUSTOMS, (ADJUDICATION) AND THE DEPUTY DIRECTOR (DIRECTORATE GENERAL INTELLIGENCE AND INVESTIGATION) FBR-ISLAMABAD

Appeal No.22/CU/IB of 2014, decided on 15th July, 2014.

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

----Ss. 17, 171 & 194-A---Seizure and confiscation of imported goods---"Aggrieved party"---Scope---Appeal filed against order-in-original, was objected to on the ground that appellant being not aggrieved party, was not entitled to file appeal---Validity---Adjudicating Authority, not only discussed the conduct of appellant, but also passed adverse orders against him---Legal right, in circumstances accrued in favour of appellant to file present appeal---Any party aggrieved by an order passed by the Adjudicating Authority, could assail that order-in-appeal, even if he was not a party before the Adjudicating Authority.

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

----Ss. 17 & 26---Confiscation of imported goods---Order without serving show-cause notice to the importer---Effect---Importer was never served with show-cause notice before passing order-in-original by Adjudicating Authority---Right to be heard, was a Fundamental Right; it was not confined to judicial proceedings, but would extend to all proceedings, whether judicial, quasi judicial or administrative---Maxim, "no one should be condemned unheard", would extend to all proceedings; which could affect, the person or property or other rights of parties concerned in the dispute; and the Maxim would apply with full force---Order passed without show-cause notice to importer, was illegal and ineffective to the extent of importer.

Sajid-ur-Rehman for Appellant.

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

2015 P T D (Trib.) 1351

[Customs Appellate Tribunal]

Before Chaudhary Muhammad Tariq, Chairman and Khalid Mahmood, Member Technical-I

ABDUL MALIK and another

versus

ADDITIONAL COLLECTOR OF CUSTOMS and another

Customs Appeal No.G-447 of 2014, decided on 18th September, 2014.

Customs Act (IV of 1969)---

----Ss. 2(s), 15, 16, 156, 168 & 194-A---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Seizure and confiscation of smuggled goods---Release against redemption fine---Huge quantity of foreign origin smuggled goods, were seized under S.168 of the Customs Act, 1969, and confiscated---Contention of appellant/smuggler, that order-in-original, could be modified/set aside, allowing release of said goods against redemption fine in terms of S.181 of the Customs Act, 1969---Validity---Goods in question were included in the list of goods notified as "smuggled goods" vide notification, which could not be allowed to be released against fine in lieu of confiscation under S.181 of the Customs Act, 1969---Adjudicating Authority, was to take serious view of the act of smuggling in a case which was characterized by a certain pattern through a particular route and was part of an un-abated trend---Such serious view would assume more alarming proportion in regard to goods, which by virtue of their rampant smuggling, would continue to deal a serious blow to the domestic tax-paying industry as well to the detriment of the national economy; and the overall good of the society---Order-in-original was upheld.

AIR 1959 Cal. 356 = 1959 Cri. L. Jour; 700 + AIR 1967 Cal. 116 and Collector of Customs v. Muhammad Tasleem 2002 MLD 296 ref.

Asim Muneer Bajwa for Appellants.

Shahid Rafiq, Inspector for Respondents.

Date of hearing: 27th August, 2014.

2015 P T D (Trib.) 1451

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member-I

COLLECTOR OF CUSTOMS

versus

Messrs HUSSAIN TRADING CO. and another

Custom Appeal No.K-1078 of 2011, heard on 20th August, 2014.

Customs Act (IV of 1969)---

----Ss. 32, 32-A, 79, 80, 156, 181 & 194-A--- S.R.O. No.283(I)/2011---S.R.O. No.638(I)/2005, S.R.O. 499(I)/2009, Heading 6306.2200---Mis-declaration---Confiscation of goods---Redemption of goods on payment of fine---Importer of goods filed goods declaration and determined his tax liability on his own and got clearance thereof under S.79(1) of Customs Act, 1969---Goods declaration was selected for scrutiny in terms of S.80 of the Customs Act, 1969, and importer was charged for having mis-declared classification of goods; who allegedly attempted to unlawfully obtain benefits of S.R.O. No.283(I)/2011 and S.R.O. No.638(I)/2005, with a view to defrauding the Exchequer---Adjudicating Officer, vide order-in-original confiscated goods under S.156(1)(14)(14-A) of Customs Act, 1969---Importer, was given option under S.181 of Customs Act, 1969 to redeem goods on payment of fine along with duty, taxes and penalty---Show-cause notice was disposed of in said terms---Moot questions required to be taken into consideration were; (i) as to whether the importable goods were classified under PCT Heading 6306.2200 as claimed by the importer and (ii) as to whether claim of PCT Heading, if proved incorrect, would constitute an offence of misdeclaration under S.32 of the Customs Act, 1969---Data made available and evidence placed on record, confirmed that the identical goods had been cleared consistently under the said PCT Heading, without any contest or dispute---Merely claiming the benefit of particular PCT Heading, or sub-Heading, would not amount to mis-declaration---Incorrect interpretation of notification, was not misstatement, when no mala fide had been proved or established---Determination of PCT Heading, in fact was the sole opinion of the Customs Officer---Importer only assisted the department by stating the PCT Heading of the goods, which could be accepted or rejected by the competent Authority, but same was not a punishable offence under any of the provisions of Customs Act, 1969, or notification issued---Alleging the charge of mis-declaration on the basis of wrong classification of Heading, would not constitute offence within the framework of S.32 of the Customs Act, 1969, as there was no false material in the statement/declaration made by the importer---Customs Authorities mis-conceived and mis-read the description and difference available between both PCT Headings, one which was claimed by the importer, and other which was allegedly charged by the department---No legal infirmity was found in the order passed by Appellate Authority---Ends of justice would be met by maintaining said order---Appeal filed by the department, being without substance, was dismissed, in circumstances.

Abdul Ghani, E.O. for Appellant.

M.H. Awan for Respondents.

Syed A. Rauf for the State.

Date of hearing: 20th August, 2014.

2015 P T D (Trib.) 1469

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I

Messrs SRS IMPEX

versus

SUPERINTENDENT DIRECTORATE GENERAL OF INTELLIGENCE and 2 others

Customs Appeals Nos.H-769 and H-670 of 2014, decided on 10th November, 2014.

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

----Ss. 2(s), 9, 10, 16, 32, 32-A, 79, 80, 156, 168, 171, 177, 179(3), 194-A---S.R.O. No.486(I)/2007, dated 9-6-2007---Notification No.188(I)/83 dated 12-12-1988---Mis-declaration---Seizure and confiscation of goods---Powers of Directorate of Intelligence and Investigation to intercept and detain goods---Validity---Appellant/importer was found involved in importing and clearing the consignment of miscellaneous items in excess through mis-declaration of description, quantity, weight and value in connivance with other associates-in-offence evading thereby huge amount of Government's legitimate duty and taxes---Vehicle carrying the container, was intercepted and detained for examination---Consignment was examined by Directorate General of Investigation and Intelligence-FBR, which after examination seized and confiscated the container under S.168 of the Customs Act, 1969---Collector of Customs/Adjudicating Authority, issued show-cause notice and thereafter vide order-in-original, held that charge of mis-declaration against the importer had been established, confiscation of seized goods was ordered---Validity---Issues to be considered by the Tribunal were: Whether Directorate General had the powers to intercept and detain the goods transported within the city or territory of Pakistan on suspicion of smuggled goods; whether, officials of Directorate General were empowered to take cognizance in the matter relating to Ss.16, 32, 32-A, 79, 80, 83, 195 of the Customs Act, 1969 read with S.R.O. No.486(I)/2007, dated 9-6-2007, and to detain/seize the consignment; whether Adjudicating Authority was competent to adjudicate the case involving amount of duty and taxes of Rs.16,15,066 in derogation of powers defined in S.179(1) of the Customs Act, 1969; and whether order-in-original was passed within the period of 120 days---Held, Directorate General derived powers for functioning within the territory of Pakistan from S.R.O. No.486(I)/2007, dated 9-6-2007 for thwarting the act of smuggling, but that would not mean that Directorate General could intercept and detain the goods transferred within city or territory of Pakistan; its jurisdiction was only restricted to the area falling outside the purview of Ss.9 & 10 of the Customs Act, 1969, and beyond 5 Kilometers from the border (of India and Iran), as expressed in S.177 of the Customs Act, 1969 and Notification No.188(I)/83 dated 12-12-1983---Board had not delegated the powers to Directorate General under provisions of Ss.16, 32, 32-A, 79, 80, 195 of the Customs Act, 1969---Present case was not of importability and least fell under the ambit of Ss.16, 32, 79, 80 & 83 of Customs Act, 1969---Board or Collector was empowered to reopen the assessment order passed under S.80 of the Customs Act, 1969---Power of adjudication, had to be determined by the Authority on the basis of amount of duty and taxes involved, excluding the conveyance as provided by S.179 of the Customs Act, 1969---In the present case amount of duty and taxes involved was Rs.1,615,066 and case of such amount fell within the powers of Additional Collector---Adjudicating Authority issued show-cause notice and passed order-in-original, while usurping the powers of his subordinate, which was not permitted under the law---Order in question was passed after more than seven months of issuance of show-cause notice to importer, whereas under proviso to subsection (3) of S.179 of Customs Act, 1969, order was to be passed within 120 days of issuance of show-cause notice, or within further extended period of 60 days---Impugned order so passed was barred by limitation---Such order which was without powers/ jurisdiction, could not be enforced under the law---Authorities also ignored the vital fact that assuming of jurisdiction, was of great importance; and power had to be exercised within the allotted sphere---Acting contrary to that was incurable, rather fatal for the case---Assumption of wrong jurisdiction, superstructure built thereon ought to crumble down---Whole proceedings were infested with inherent legal infirmities, substantive illegality which would tantamount to patent violation of mandatory statutory provisions; and in utter disregard of the provisions of the Act and principles of settled law---Order-in-original was held to be null and void, and was set aside---Appeal of importer was allowed as prayed for.

K-719/02; H-720/02; H-686/03; Q-776/04; 2005 PTD (Trib.) 135; PLD 1991 SC 630; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; PLD 1996 Kar. 68, 2006 PTD 978; Omer and Company v. Controller of Customs, (Valuation): 1992 ALD 449; 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, Nowshera and others v. Sarfraz Khan and others, PLD 2001 SC 514; Messrs Paramount International (Pvt.) Ltd. v. FOP and others 2014 PTD 1256; Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; 2004 PTD 624; All Pakistan News Paper Society and others v. FOP PLD 2004 SC 600; Khyber Tractors (Pvt.) Ltd., v. FOP PLD 2005 SC 842; Pak Suzuki Motors Company Ltd, Karachi v. Collector of Customs, Karachi 2006 PTD 2237; 2009 PTD (Trib.) 1996; 2010 PTD (Trib.) 832; 2009 PTD 1112; 2010 PTD 465; 2010 PTD (Trib.) 1636; 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; Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587; Messrs Smith Kline French v. Pakistan 2004 PTD 3020; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2009 PTD 1978; Innovative Impex, v. Collector of Customs, Sales Tax and Federal Excise (Appeal) 2010 PTD (Trib.) 1010; Fazal Ellahi v. Additional Collector of Customs, MCC of PaCCS 2011 PTD (Trib) 79; Unique Wire Industries v. Additional Collector of Customs, MCC of PaCCS 2011 PTD (Trib) 987; Kaka Traders v. Additional Collector of Post Clearance Audit 2011 PTD (Trib.) 1146; Pak Electron Ltd., v. Collector of Customs, Lahore and others 2012 PTD (Trib.) 1650; 2008 CL 37; 2010 PTD (Trib.) 2158; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1680; 2011 PTD (Trib.) 2086; 2014 PTD (Trib.) 1566; 1983 SCMR 1232; Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517; PLD 1995 Kar. 587; PLD 1992 SC 486; 2001 SCMR 103; 2011 PTD (Trib) 2114; 2011 PTD (Trib) 2557 and Ali Muhammad v. Chief Settlement Commissioner 2001 SCMR 1822 ref.

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

----S.206---Correction of clerical error---Scope---Department, had the authority under S.206 of the Customs Act, 1969 for correction of "clerical or arithmetical errors", in any decision or order passed by the Federal Government, Board or any Officer of Customs or errors arising out of accidental slip or omission---Mentioning clerical error, arithmetical error, accident slip only would not mean that nature, or scope of any order could be enlarged, changed or altered by corrigendum or reviewed under provisions of S.206 of the Customs Act, 1969.

(c) Administration of justice---

----If the law had prescribed method for doing of a thing in a particular manner, such provisions of law, was to be followed in letter and spirit; and achieving or attaining the objective of performing, or doing of a thing in a manner other than provided by law would not be permitted.

(d) Administration of justice---

----Courts being custodian of law, were required to maintain the norms of justice and equity; litigants were to be respected, nor on account of court's power to legalize injustice on technical grounds, but to remove injustice.

Nadeem Ahmed Mirza, along with Obayd Mirza for Appellants (in Appeal No.H-769 of 2014).

Yawar Abbas, I/O, I&T & I&V (FIU) for Respondent No. 1 (in Appeal No.H-769 of 2014).

Yawar Abbas, I/O, I&T & I&V (FIU) Hyderabad for Appellant (in Appeal No.670 of 2014).

Nadeem Ahmed Mirza, and Obayd Mirza for Respondents (in Appeal No.H-670 of 2014).

Dates of hearing: 15th and 18th September, 2014.

2015 P T D (Trib.) 1524

[Customs Appellate Tribunal]

Before Adnan Ahmed Member (Judicial-II) and Shaukat Ali Member (Technical-II)

AMANULLAH

versus

COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.K-129 of 2012, decided on 22nd October, 2014.

Customs Act (IV of 1969)---

----Ss. 2(s), 17, 26, 156(1)(89)(90), 171, 194-A & 211---Detention and confiscation of vehicle---Directorate of Intelligence and Investigation F.B.R. intercepted the vehicle and possession holder of said vehicle, failed to produce any documents showing its legal import, or any evidence of payment of duty/taxes on its import, and vehicle was placed under detention, but subsequently was handed over to appellant/who claimed to be owner of said vehicle against surety---Appellant claimed that he had purchased impugned vehicle through an auction, and appellant had obtained its new registration---Forensic examination of impugned vehicle, conducted at the Forensic Science Laboratory, established that chassis of said vehicle had been tampered with, and original chassis number of the same had been completely defaced---Appellant's plea of legal import and lawful possession of impugned vehicle, did not find favour with the Adjudicating Authority, and vehicle was confiscated---Enough evidence was on record to the effect that vehicle in question had been unlawfully brought (smuggled) into the country---Directorate, in circumstances, had acted in accordance with law by seizing impugned vehicle---Notice under S.26 of the Customs Act, 1969, issued by the Directorate was perfectly lawful, as the provisions of S.211 of the Customs Act, 1969 were not relevant, because the vehicle, had not been lawfully imported into the country; and the import documents produced were irrelevant---Vehicle could not be released to the appellant, despite the fact he purchased the same in good faith on payment of reasonable amount---Orders passed by forums below being correct in law and on facts, did not warrant any interference---Vehicle in question was ordered to be taken into possession by the Directorate General and disposed of as per the Government Policy---Appellant, had the option of getting back the money that he paid to the Auctioning Authority for purchase of the vehicle in question.

Ms. Dil Khurram Shaheen for Appellant.

Ghulam Muhammad Shar, I.O. for Respondents.

Date of hearing: 14th October, 2014.

2015 P T D (Trib.) 1549

[Customs Appellate Tribunal]

Before Chaudhry Muhammad Tariq Chairman and Khalid Mahmood, Member Technical

PAKISTAN INTERNATIONAL AIRLINES CORPORATION

versus

COLLECTOR OF CUSTOMS and 2 others

Customs Appeals Nos.K-1133 to 1176 of 2011, decided on 30th October, 2014.

Customs Act (IV of 1969)---

----Ss. 32(2), 156(1)(10-A)(14), 193 & 194-A---Evading amount of customs duty and taxes---Issuance of show-cause notice---Dismissal of appeal on ground of limitation---Appellant corporation allegedly evaded considerable amount of customs duty and taxes, chargeable on the re-import of their aircraft engines after being repaired abroad---Customs duty and taxes were calculated, but appellants paid less than calculated amount of duties and taxes---Appellants allegedly having made false declaration and untrue statement, had violated the provisions of S.32(2) of the Customs Act, 1969, punishable under S.156(1)(10-A)(14) of the Act---Appeal filed by appellants against order-in-original, was dismissed by the Customs Tribunal on ground of limitation---Government vide notification issued an Amnesty Scheme, whereby dues of customs duty and taxes, which assessee failed to pay, could be deposited on or before specified date without payment of penalty, fine and surcharge---Appellant, availing the benefit of said Amnesty Scheme, negotiated with Customs Authorities, and finally settled the dispute, and customs authorities allowed appellant to deposit outstanding amount, which was deposited by the appellant accordingly---Appellant having deposited entire outstanding amount of duty and taxes, within the period of limitation, demand raised by the Customs Authorities was unjust and unlawful---Impugned order, was set aside, in circumstances.

Khalid Javed for Appellants.

G.A. Khan and Yousif Baig for Respondents.

Date of hearing: 29th October, 2014.

2015 P T D (Trib.) 1563

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Yahya, Member (Technical-I)

Messrs SOOR GHAR TRADERS

versus

ADDITIONAL COLLECTOR (ADJUDICATION-II)

Customs Appeal No.K-197 of 2013, decided on 9th December, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 32, 32-A, 79, 80, 156(1)(14)(14-A)(45) & 194-A---S.R.O. No.499(I)/2009 dated 13-6-2009---Mis-declaration in terms of unit of measurement and value of imported goods---Confiscation of goods and imposition of penalty---Importer filed 'Goods Declaration' for the imported goods, sought clearance of the same by determining the liability of taxes---Goods Declaration was selected for scrutiny, and examination report revealed that the importer had declared the Unit of Measurement (UOM) as roll, instead of Kg, which allegedly was not in accordance with 'UOM' mentioned in Pakistan Customs Tariff; and violation of the same was punishable offence under S.R.O. 499(I)/2009 dated 13-6-2009---Offending goods were confiscated, with option to the importer to redeem goods within 15 days on payment of penalty---Adjudicating Authority had observed that the declared value worked out to be more than 30%, redemption fine along with addition of duty and taxes was imposed at 35% as prescribed under S.R.O. 499(I)/2009 dated 13-6-2009---Wisdom behind the said SRO was to evaluate, not a quantum of loading, but the quantum of under invoicing that was required to be determined for invoking penal action in excess of under-invoicing if it was 30%---In the present case, fine could be imposed on the goods with the simple ground that the extent of difference between the declared and ascertained value, would come to 23.53% which equated up to 20% of the difference---Adjudicating Authority, in circumstances, passed impugned order with least application of judicious mind, and made the observation perverse to the evidence and failed to consider the criteria of the formula prescribed for such kind of assessment value---To establish "untrue statement and mis-declaration" in terms of S.32(2) of Customs Act, 1969, there must be evidence and mens rea; and evidence of collusion---No evidence about the element of mens-rea as well as collusion was found in the present case---Adjudicating Authority passed the impugned order with least application of judicious mind, pitch of fine and penalty imposed, not corresponded with gravity of offence---Impugned order was modified---Importer, would only be liable to pay adjudicated amount of additional duty and taxes accordingly.

Customs Appeal No.K-118/2008 dated 5-4-2010; 2002 PTD (Trib.) 3077; 2007 SCMR 1357 = 2007 PTD 1858; 2008 PTD 1478; 2004 PTD 2993; Superior Textile Mills Ltd. v. FOP 2000 PTD 399; Collector of Sales Tax and others v. Superior Textile Mills Ltd., and others PLD 2001 SC 600; Saleem Raza v. FOP and others 2012 PTD 302; Messrs Weave and Knit (Pvt.) Ltd. v. Additional Collector of Customs (Adjudication) Karachi and others 2004 PTD 2981; Messrs Liver Brothers of Pakistan Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal and others 2005 PTD 2462; Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi-SBLR 2002 Tribunal 57; Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133; Union Sport Playing Cards Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Ltd. v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Ltd. v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 ref.

Muhabbat Hussain Awan for Appellant.

Abdul Ghani for Respondent.

Date of hearing: 10th November, 2014.

2015 P T D (Trib.) 1600

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member Judicial-II

Messrs KOLDKRAFT (PVT.) LTD. through Chief Executive

versus

FEDERAL BOARD OF REVENUE through Chairman and 2 others

Customs Appeal No.K-1610 of 2014, decided on 2nd February, 2015.

Customs Act (IV of 1969)---

----Ss. 32(1)(c)(2)(3-A), 156(1)(14) & 194-A---Short payment of tax---Inadmissible concession---Recovery of unpaid advance tax---Importer had got various consignments of components/parts and finished articles on concessionary rate of income tax at 3%, as against the standard payable rate vide Goods Declaration---Said inadmissible concession resulted in the short payment of Income Tax---Adjudicating Officer passed ex parte order by observing that appellant/importer was responsible for non-appearance---Demand of the allegedly short paid tax was raised, vide show-cause notice under S.32(1)(c)(2) & (3-A) of Customs Act, 1969 and S.148 of the Income Tax Ordinance, 2001, punishable under Cl.(14) of S.156(1) of the Customs Act, 1969---Section 32 of the Customs Act, 1969 was not validly applicable to the case; and the power available to Customs Officer in terms of Ss.148 & 50(5) of Income Tax Ordinance, 2001, was limited to 'collection' of the tax only---Recovery of unpaid advance tax, could only be demanded and effected by the Officer of Income Tax (Inland Revenue) of competent jurisdiction---Customs Officer could not assume upon himself the power, which the Income Tax Ordinance, 2001, had not conferred upon him---Goods imported fell within the ambit of raw material as, importer was a manufacturer non-commercial importer---Importer was manufacturing cold equipments, which were being used in cold storages, either fixed or placed in motor vehicles and vans for transporting the different kinds of edible items from one place to another---Burden lay on the department as to prove the sale of compressors as commercial items in the open market beyond any shadow of doubt---Demand raised through the impugned order showing non-interest and non-discharge of proper mechanical approach of the department on the issue, both on legal and factual grounds, impugned order-in-original, was set aside.

2010 PTD 2086; 2010 PTD 465; 2012 PTD (Trib.) 1697; 2004 MLD 1170; Lucky Cement v. Federation of Pakistan C.P. No.216/13 dated 26-2-2013; 2010 PTD 592 and Messrs Al-Hilal Motors v. Collector of Sales Tax and Central Excise (East) Karachi 2004 PTD 868 ref.

Ajeet Sunder for Appellant.

Arif Mqbool for Respondents.

Date of hearing: 23rd December, 2014.

2015 P T D (Trib.) 1752

[Customs Appellate Tribunal]

Before Ch. Muhammad Tariq, Chairman/Member Judicial

COLLECTOR OF CUSTOMS

versus

Messrs USMAN and another

Customs Appeals Nos. K-230 to 291 of 2011, decided on 28th October, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 32 & 194-A---Assessment of value of imported goods---Value of the imported goods would be assessed on the basis of 90 days date prior to the import; or within 90 days after import of goods---Valuation advices issued on different dates would continue and survive to have validity for duration of 90 days from the bound to justify the failure to issue fresh advice; or to record reasons to maintain the existing valuation advice---Valuation ruling imposed, in circumstances, be recorded as valid for the period of 90 days from the date of issuance---No illegality or infirmity in the impugned order having been found, same was unexceptionable and well reasoned order---In absence of any reason to interfere in the impugned order-in-appeal, appeals were dismissed, in circumstances.

Agha Jamshed Ali, A.O. for Appellant.

Aqeel Ahmed for Respondents.

Date of hearing: 27th October, 2014.

2015 P T D (Trib.) 1817

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Technical-I)

Messrs M.M. SILK MILLS (PVT.) LTD.

versus

DEPUTY COLLECTOR OF CUSTOMS and another

Custom Appeals Nos. K-732 and K-733 of 2011, decided on 24th September, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 81 & 194-A---Provisional determination of classification of imported goods---Value of goods and liability of importer---Importer, imported a consignment, filed Goods Declaration, and got cleared goods against an undertaking to the effect that the matter would be referred to the classification centre for determination of classification of the imported goods; and that importer would pay the differential amount of customs duty, taxes, if required as a consequence of the determination of classification---P.C.T. Committee, ruled vide Public Notice, that goods imported in the case were correctly classified---Subsequently, after more than one and half years, importer, vide impugned order was asked to pay differential amount---Validity---Under S.81(2) of Customs Act, 1969, assessment in the case, was required to be finalized within six months of the date of provisional determination---Assessment finalized after one and half years, was violative under the law, in circumstances, when goods were released provisionally under S.81 of the Customs Act, 1969, it was mandatory duty and legal obligation of the department to issue notice for demand/recovery for any discrepancy, which was found in the case, subject to the prescribed period of limitation of six months, but same had not been done, in the case---Matter having not been finalized within stipulated period of six months, provisional determination, had attained finality, in circumstances.

M.H. Awan for Appellant.

Ghulam Yasin, P.A., for Respondents.

Date of hearing: 4th September, 2014.

2015 P T D (Trib.) 1869

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

COLLECTOR OF CUSTOMS through Deputy Collector-AIB/R&D

versus

COLLECTOR, COLLECTORATE OF CUSTOMS and another

Customs Appeal No.K-473 of 2013, decided on 23rd January, 2015.

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

----Ss. 19, 25, 32, 80, 83, 156, 168, 179, 181, 194-A & 195---Customs Rules, 2001, Rr.438 & 442---SRO 1125(I)/2011, dated 31-12-2011---S.R.O. 499(I)/2009, dated 13-6-2009---S.R.O. 1155(I)/2011---S.R.O. 371(I)/2002, dated 15-6-2002---Import of goods---Mis-declaration---Filing false and forged information/particulars---Confiscation of goods---Importer, imported a consignment of 704 meter fabric, filed goods declaration for clearance of imported goods, claiming benefit of SRO 1125(I)/2011, dated 31-12-2011 and paid an amount of Rs.30,831 towards duty and taxes---Physical examination of the consignment, indicated actual value of goods Rs.2941631---Difference in declared and the given invoice, in terms of percentage came 1275% lower---Importer allegedly committed an offence by filing false and forged information/particulars of the case; besides making an attempt to clear imported goods at highly under-invoiced value, wilfully and with mala fide intention---Importer, allegedly had attempted to defraud the Government from its legitimate revenue amounting to Rs.6,01,666---Adjudicating Authority holding that charges against importer having been established ordered confiscation of imported goods, with right of importer to get the goods released on payment of 35% redemption fine---Fine imposed on the importer was remitted and penalty was reduced by appellate authority and case was referred to concerned adjudicating officer, for doing the needful---Validity---Judgment, passed by both the authorities below, were not only arbitrary, illegal, but, were mala fide and without any lawful authority, hence void and ab initio by virtue of being in derogation of settled law---Collector, in the present case, had authorized Deputy Collector to file appeal against impugned order of the authorities below, but affidavit in support of filing appeal was submitted and executed by Assistant Collector, who otherwise had no power as per prescribed law---Assessment of imported consignment was finalized under S.80 of the Customs Act, 1969, but neither appeal was filed against said assessment, nor same was challenged before the competent Authority; nor Collector concerned had intended the process to invoke the power under S.195 of the Customs Act, 1969 to re-open case for examination and re-assessment---Consignment, in question had undergone the procedure as assessment/demand order under the provisions of Ss.80 & 83 of the Customs Act, 1969, and Rr.438 & 442 of the Customs Rules, 2001, by competent Authority in exercise of the powers conferred upon by the Board through notification---Such order was appealable, which could be assailed either by the importer or the officer of the Customs under the provisions of Customs Act, 1969, within 30 days of the order, but same was not filed within that period, with the result that original assessment order attained finality, which could not be disturbed by any authority---Show-cause notice and the impugned order passed during the hierarchy of Customs, which infested with patent illegalities, were declared to be null and void, and were set aside and appeal filed by Collector of Customs, was rejected, in circumstances.

Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256; Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310; Messrs Smith Kline French v. Pakistan 2004 PTD 3020; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505 and Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

(b) Constitution of Pakistan---

----Art. 4---Right of individuals to be dealt with in accordance with law---Every citizen enjoyed the protection of law to be treated in accordance with law---Such was an inalienable right of every citizen, wherever he could be---No action detrimental to the life, liberty, body, reputation or property of any person, would be taken, except in accordance with law.

Abdul Rashid, A.O. for Appellant.

M.H. Awan for Respondents.

Date of hearing: 12 November, 2014.

2015 P T D (Trib.) 1980

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs AL-AMNA INTERNATIONAL and 2 others

versus

DEPUTY COLLECTOR OF CUSTOMS and another

Customs Appeals Nos.K-385-K-412, K-413 to 419 and K-420 to K-421 of 2014, decided on 16th January, 2015.

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

----Ss. 3DD, 26-A, 32(3), 80, 83 & 194-A---Customs Rules, 2001, Rr. 438 & 442---S.R.O. 500(I)/2009 dated 13-6-2009---S.R.O. 371(I)/ 2002, dated 15-6-2002---Re-assessment---Appellants/importers, imported consignments of Fruit Mix and filed goods declaration, whereby goods were declared to be classifiable under HS Code 2008-9700, and the value was declared---Said declarations were accepted by Customs Authority, and goods were released without payment of sales tax---Subsequently it transpired that canned fruits were not eligible for exemption---Resultantly, Goods Released with inadmissible zero rating of Sales Tax, were re-assessed accordingly by authorities---Validity---Under provisions of S.3DD of the Customs Act, 1969, Directorate of Post Clearance Audit had been created and its Officials had been delegated powers through Notification No. S.R.O. 500(I)/2009, dated 13-6-2009 for conducting audit of the importer under S.26-A of Customs Act, 1969---Re-assessment by Deputy Collector Customs, Goods Declaration, after clearance, was without lawful authority, and being without any power/jurisdiction, was void ab initio and coram non judice--Re-assessment under S.80(3) of Customs Act, 1969, after release of the goods was permitted only after calling for the documents---Upon receipt of documents or information so submitted, if were found to be incorrect in respect of earlier assessment, the re-assessment could be made---No mis-declaration being visible in material particulars, no re-assessment was required under S.80(3) of Customs Act, 1969---Re-assessment was permitted prior to passing of order of clearance under S.83 of Customs Act, 1969 and R.442 of Customs Rules, 2001---No mandatory show-cause notice had been issued before ordering re-assessment---Mandatory conditions for exercise of jurisdiction, having not been fulfilled, entire proceedings, had become illegal and suffered from want of jurisdiction/power---Any order passed in continuation of those proceedings in adjudication of appeal, equally suffered from illegality and were without jurisdiction---Since re-assessment order, was without jurisdiction, the entire proceedings, right from re-assessment order, order-in-appeal, were also without lawful authority and jurisdiction---Adequate breach of principles of natural justice equated with breach of law by the hierarchy of the customs, suffered from grave legal infirmities, were declared illegal, void ab initio and of no legal effect---Appeals were allowed, in circumstances.

Case-law referred & relied.

(b) Interpretation of statutes---

----Taxing statute---Tax statutes, were to be interpreted in the light of what was clearly expressed---In case of ambiguity arising from construction, benefit must go to the tax payer---In interpreting the taxing statute, the executive must look to the words of the statutes and interpret in the light of what was clearly expressed---One could not imply anything which was not expressed and could not import provision in the statute, so as to support assumed deficiency---No room for intendment---No equity about a tax---No presumption as to tax, nothing was to be read in nothing was to be implied---One was only to look fairly at the language used nothing else to be done.

Case-law referred.

(c) Constitution of Pakistan---

----Art.4---Right of individual to be dealt with in accordance with law---Every citizen enjoyed the protection of law and was to be treated in accordance with law which was an inalienable right of every citizen, wherever he could be and every other person for the time being within Pakistan---No active detrimental to the life, liberty, body, reputation or property of any person would be taken, except in accordance with law---According to the accepted form of legal process and postulated, a strict performance of the function and duties were laid down by law---Action which was mala fide or colourable, was not regarded as action in accordance with law---Action taken upon no ground at all or without proper application of mind by quasi judicial authorities, would also not qualify as an action in accordance with law and would have to be struck down as being action taken in unlawful manner---Person acting in pursuance of a statute, could not be said to be acting bona fide, if he had no reasonable ground for believing that the statute justified what he did---If the case was one where there were no grounds or the grounds were such that no reasonable person, would have acted on the supposition that he was acting under the authority of statute, then it was a case of the court to look into it.

Case-Law referred.

Obayd Mirza and Nadeem Ahmed Mirza, Consultant for Appellants.

Ghani Soomro, Examiner for Respondents.

Date of hearing: 23rd October, 2014.

2015 P T D (Trib.) 2146

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II) and Khalid Mahmood, Member (Technical-I), Islamabad

Messrs PAKISTAN STATE OIL COMPANY LTD., KARACHI

versus

COLLECTOR OF CUSTOMS, EXCISE AND SALES TAX and another

Custom Appeals Nos.K-688 and 689 of 2005, decided on 4th August, 2014.

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

----Ss. 85, 12, 13, 80, 81, 86, 87, 88, 89, 94, 104 & 105---Application for warehousing---Warehousing of goods---Procedure---Goods were either warehoused in Public Bonded Warehouse under S. 12 of Customs Act, 1969 or Private Bonded Warehouse under S. 13 of Customs Act, 1969 goods declaration, for warehousing, had to be filed under S. 85 of Customs Act, 1969 in the format of prescribed goods declaration for warehousing---In case of liquid items like oils, petroleum, molasses etc., which were stored in tanks, tanks were declared as warehouses---Upon filing of application, assessment was made for duty and taxes under S. 80 or 81 of Customs Act, 1969 in all aspects for levy of duty and taxes to be paid at the time of clearance as defined in S. 84 of Customs Act, 1969---Importer had to submit a post-dated cheque and indemnity equivalent to amount of duty and taxes---In case of change of duty, goods declaration was re-assessed on basis of altered duty and a new indemnity bond would be executed in accordance with S. 86 of Customs Act, 1969---Goods once assessed for duty and taxes, were forwarded to warehouse in terms of S. 87 and upon receipt, the same were examined by warehouse-keeper and then had to be returned to appropriate officer under S. 88(1) of Customs Act, 1969---Goods were to be warehoused in manner prescribed in S.89 with exception given in S. 94 of Customs Act, 1969---Importer could obtain clearance of warehouse goods after filing ex-bond goods declaration under S. 104 of Customs Act, 1969 for home consumption after payment of assessed duty and taxes---In case of clearance of warehouse goods for export, warehouse owner had to file goods declaration for export under S. 105 of Customs Act, 1969 without payment of duty and taxes but subject to payment of all rent or other charges.

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

----Ss. 131, 104, 105 & 106---Clearance of warehoused goods for export---Importer filed several Goods Declarations for export under S.131 of Customs Act, 1969 and not under Ss.105 & 106 of the Act---Contention of importer was that supplies made were duty-paid, for consumption of Pakistan Navy's vessels---Importer also adjusted local sale through Form AR-3 on plea that sale to Pakistan Navy was for their ships proceeding for foreign destinations as "provision/stores"---Validity---Importer devised a mechanism for avoiding payment of development surcharge which he had not paid at time of obtaining clearance under S. 104 of Customs Act, 1969---No evidence was produced by importer to controvert allegation levelled through incriminating valid evidence e.g. certification from Pakistan Navy to the effect that they had purchased the goods exclusively for ship leaving for foreign voyage or Goods Declaration filed under S. 105 or 106 of Customs Act, 1969 or Petroleum Surcharge paid by Pakistan Navy on supply to importer had been refunded to them.

(c) Taxation---

---"Tax avoidance" and "Tax evasion"---Distinction--Distinction between "tax avoidance" and "tax evasion" lay in legality of a transaction and that a deliberate attempt to avoid payment of leviable tax through colorable exercise tantamount to an illegal act resulting in "tax evasion" or "illegal avoidance", which was not permitted.

(d) Interpretation of statutes ---

----Fiscal statute---No equity about a tax; there was no presumption as to tax--Nothing was to be read in, nothing was to be implied.

(e) Administration of justice ----

----Neither fair nor desirable to expect legislature to intervene and take care of every devise and scheme to avoid taxation ----Court was to take stock to determine nature of new and sophisticated legal devises to avoid tax and consider whether situation created by devises related to existing legislation with aid of its emerging techniques of interpretation.

Mc Dowell and Co. Ltd. case v. Commercial Tax Officer 1985 1154 ITR 148(SC) rel.

(f) Taxation ---

----Avoidance of---Avoidance of tax by legal method may not amount to evasion but the moment avoidance was sought by illegal contrivance deceitful method and adopting a course not permissible by law, the same turned into "evasion".

Regional Commissioner Income Tax Company-II Karachi v. Sultan Ali Jeoffrey 1993 SCMR 266 rel.

(g) Words and phrases ---

----"Evasion"---Meaning---Underhand dealing---Nothing more than intentional avoidance of something disagreeable.

Stroud's Judicial Dictionary, 4th Edition.

(h) Administration of justice---

----Party was to act within parameters of law and if the party at its own indulged in some unlawful act and took shelter that it was precedent and law that should be construed in accordance with its whims and whishes was not correct as said construction was not based on law and precedent instead, the party considered its act as correct---Action of the party to be within ambit of precedent was absurd---Existing practice had to be supported by provision of law---If any practice was in deroga-tion of law that had to be discontinued forthwith.

Nazir Ahmed v. Pakistan and 11 others PLD 1970 SC 453; Union Sports Play Cards Company v. Collector of Customs and another 2002 MLD 130 and Radhika Corporation and others v. Collector of Customs 1989 SCMR 353 distinguished.

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

----Ss. 32(3), 32(2) & 32(1)(a)(b)---Issuance of Show-cause notice---Limitation---Contention of importer was that his case fell within the ambit of S. 32(3) of Customs Act, 1969, thus, show-cause notice issued was barred by time and recovery of non-paid PDL stood abated---Validity---Section 32(2) of Customs Act, 1969 was to be read in conjunction with S. 32(1)(a)(b) which dealt with matter where by reason of some collusion any duty or charge had not been levied or had been short levied or had been erroneously refunded---Period of limitation prescribed under said section was five years while in S. 32(3) of Customs Act, 1969 period of limitation prescribed was three years and it covered those matters where by reason of any inadvertence, error or misconception any duty or charge had not been levied or had been short levied or had been erroneously refunded---Section 32(3) of Customs Act, 1969 speaks about inadvertence, error or misconstruction--Said act of importer of non payment of PDL, least fell within the ambit of any of the words of the section---Case of importer did not fall under the ambit of S. 32(3) of Customs Act, 1969---Perusal of show-cause notice showed that it contained Ss. 32(1) & 32(2) of Customs Act, 1969; it was on basis of such allegation that show-cause notices were issued to importer under S. 32(2) of Customs Act, 1969 providing a period of limitation of five years at relevant time---If the disputed supplies were duty-free provisions and admissible for store under S.106 of Customs Act, 1969, importer should have filed goods declaration for export under S. 106 of Customs Act, 1969---Appeal was dismissed.

FOP v. Ibrahim Textile Mills 1992 SCMR 1898 distinguished.

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

----Ss. 32(1) & 32(2)---Show-cause notice---Determination of nature of notice---For determining nature of show-cause notice if the same was issued under Ss. 32(1) & 32(2) of Customs Act, 1969 or S. 32(3) of Customs Act, 1969, its contents were to be read as a whole and on basis of its substance, it was to be judged that whether it was a show-cause notice under Ss. 32(1) & 32(2) of Customs Act, 1969 or otherwise.

(k) Words and phrases---

----"Evade"---Meaning---Action to escape from or to avoid specifically by bulling, trickling or eluding.

Oxford Dictionary of English Language ref.

(l) Words and phrases ---

----"Tax evasion"---Meaning---Wilful attempt to defeat or circumvent tax law in order to illegally reduce one's tax liability---Tax evasion was punishable by both civil and criminal penalties and it was also termed as tax fraud.

Black Law Dictionary, 7th Edition ref.

(m) Penalty---

----Imposition of---Scope---Imposition of penalty may not always be dictated under protection/shelter of a legal umbrella---Imposition of penalty to perform a statutory obligation or to indulge into glaring, blatant and grave violation of statutory provision was exercised under relevant provision of law and under doctrine of detoriant punishment---Imposition of penalty needed to be exercised judicially keeping in view all relevant circumstances entailing a particular case.

Taha Ali Zia for Appellant.

G.A. Khan for Respondents.

Date of hearing: 16th July, 2014.

2015 P T D (Trib.) 2360

[Customs Appellate Tribunal]

Before Chaudhary Muhammad Tariq, Chairman and Khalid Mahmood, Member (Technical)

Messrs MUMTAZ GHANI TEXTILE (PVT.) LTD.

Versus

COLLECTOR CUSTOMS (APPEALS) and another

Customs No.K-610 of 2014, decided on 8th December, 2014.

Customs Act (IV of 1969)---

----Ss. 13(1)(c), 26, 32, 156(1)(14), 194-A & 223---Customs Rules, 2001, R.459---S.R.O. No.212(I)/2009 dated 5-3-2009, Sched. Duty drawback claim---Mis-declaration---Imposition of penalty---Exporter, who exported consignments, filed duty drawback claim under Notification S.R.O. No.212(I)/2009 dated 5th March, 2009---On scrutiny, it was found that net weight of the exported goods (gloves made of PVC with Knit wrest), came to 5 to 6 grams/pair, which was quite irrational being not in conformity with the normal/routine practice---Show-cause notice was issued to the exporter as to why your duty drawback claim should not be rejected being inadmissible---Adjudicating Authority did not agree with the reply of the exporter, on the ground that value of goods and the duty drawback/rebate amount, filed or claimed against the Goods Declaration, differed abnormally---Adjudicating Authority in view of undue rebates claimed on the basis of alleged untrue facts and declaration, penalty was imposed on the exporter under clause 14 of S.156(1) of Customs Act, 1969---Appeal filed by the exporter against order of Adjudicating Authority having been dismissed by Appellate Authority below, the exporter had filed appeal before Appellate Tribunal---Contention of the exporter was that value of exported goods and admissibility of duty drawback was on "per pair" basis and not 'weight basis' and that whole exercise of creation of impugned order, was flawed and not based on legal footings---Exporter had produced documentary evidence in support of his contentions--- Validity---Federal Board of Revenue vide letter dated 29-3-2013, categorically explained that the duty drawback rates notified in S.R.O. No. 212(1)/77009 dated 5-3-2009, were on "per pair" basis without any size, weight and grammage---Both forums below travelled beyond the allegations levelled in show-cause notice, which being unacceptable in the eye of law, was riot warranted---Representative of the department also did not deny that exporter had obtained raw material from the local market---Allegation levelled in the show-cause notice against the exporter lacked appropriate basis and were not maintainable---Both orders of authorities blow were set aside, and show-cause notice issued to the exporter was vacated, in circumstances.

Collector of Sales Tax v. Zamindar Paper and Board Mills 2007 PTD 1804 ref.

Afzal Bhatti and Farrukh Saleem for Appellants.

Mukhtar Ahmed, A.O. for Respondents.

Date of hearing: 28lh November, 2014.

2015 P T D (Trib.) 2409

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member Judicial-II

ASIF JAVED

Versus

ADDITIONAL COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-62,6 of 2014, decided on 7th March, 2015.

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

----Ss. 2(s), 16, 26, 32, 156, 162, 163, 168, 171, 177 & 194-A---SRO No.499(I)/2009, dated 13-6-2009---Seizure and confiscation of vehicle on charge of smuggling (non-duty paid vehicle)--- Vehicle in question was intercepted on charge of smuggling (non-duty paid vehicle) and was seized under S.168 of the Customs Act, 1969 for violation of Ss.2(s), 16, 32 & 156(2) of Customs Act, 1969---Adjudicating Authority ordered outright confiscation of said vehicle---Validity---No notice under S.26 of the Customs Act, 1969 was given by Adjudicating Authority to appellant; and no specific charge regarding illegality of importation of vehicle, was disclosed---Impugned order was passed in haphazard manner without considering the material particulars, and evidence submitted by the appellant---Appellant purchased vehicle in question from open market in a legal way---Record had shown that relevant documents in support of the claim of appellant, that the vehicle was duty paid, and no illegality was attributed by customs authority---Mala fide, on part of customs authority, was reflected from the act and omission adopted for getting Forensic Science Laboratory's report--- Vehicle was not sent for chemical examination, and report was obtained in absence of owner of vehicle in question-Verification of documents, as well as Registration Book, had not been done from the concerned quarters before issuance of show-cause notice---Required documents were submitted, which transpired that subject vehicle was registered after due process of law---Application of Ss.2(s) & 16 of Customs Act, 1969, to the merits of the case by the seizing authority, was misconceived, since vehicle did not stand in the prohibitory/ restricted list of items of S.2(s) of Customs Act, 1969, and was brought into the country by a route, other than route declared under Ss.9 & 10 of Customs Act, 1969---If a person had been found without lawful excuse in possession of smuggled vehicle etc., he would be dealt with under cl.(89) of S.156 of Customs Act, 1969; and if the evidence produced by the prosecution, established that accused had smuggled the vehicle, he would be liable to be dealt with under cl.(8) of S.156 of the Customs Act, 1969; and in such circumstances he would not be punished under subsection (89) of S.156 of Customs Act, 1969---Definition of "smuggling" in S.2(s) of Customs Act, 1969, must be carefully considered in order to determine, whether the same would apply in the facts and circumstances of the particular case---Appellant, after detention of vehicle submitted evidence about lawful possession of vehicle along with 'NOG' and verification at the time of registration of vehicle by Motor Registration Authority from concerned Officials of customs---No evidence was on record to suggest that appellant was instrument in preparing said documents, or he had no knowledge about the illegal status of the impugned vehicle---Before embarking upon any inquiry, the functionary, must possess definite material as to establish any illegality committed by the citizen---Prosecution was to establish through independent evidence, that the vehicle in question was smuggled or brought into the country through unauthorized route or otherwise, but, that had not been done in the case---All allegations allegedly raised by the department were afterthoughts---Department had failed to perform its duty---Impugned order, which suffered from grave infirmity, was declared void, ultra viras, ab initio, illegal and was set aside---Appeal was allowed.

1995 PTD (Trib.) 580; Karachi Administration Employee Cooperative Housing Society Limited v. Government of Sindh 2004 YLR 1070; Assistant Director Intelligence and Investigation v. Messrs B.R. Herman PLD 1992 SC 485; Shaukat Hussain v. Zulfiqar Ahmed and others PLD 1981 Lah. 13; 1983 PCr.LJ 676; Messrs Kamran Industries v. Collector of Customs PLD 1996 Kar. 68; Imtiaz v. Ghulam Ali PLD 1963 SC 382; Federation of Pakistan through Director General of Intelligence and Investigation FBR, Karachi v. Muhammad Jamal Rizvi and others 2012 SCMR 169 = 2012 PTD 90; Haji Abdullah' Jan 3 and other's case 1994 SCMR 749; Director Directorate General of Intelligence, and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd., and others 2006 SCMR 129 and 2007 PTD 2265 ref.

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

----S. 26---Power of authority to require information to be furnished---Object of S.26 of the Customs Act, 1969, was to empower the authority to -ask for information, or require the production of documents; or inspect the same in order to determine the legality or illegality of importation or exportation of vehicle, which had been imported or exported; the value of vehicle, the nature, amount and source of funds, or the assets with which the vehicle was acquired, and the customs duty chargeable thereon, or for deciding anything identical thereto---Authority could only for specific purpose of determining the legality or illegality; call for such information as required under S.26 of the Customs Act, 1969---Authorized Officer of the customs, could call upon any one to furnish information in case, where such determination was required---Such officer could not make a roving inquiry, or issue a notice by merely shooting in the dark in the hope that it would enable him to find out some material out of those documents, and then charge the party with irregularity or illegality---Customs authority had to state and disclose in the notice the purpose for which party was required to produce those documents, or supply information-Unless such purpose was specified in the notice, it would be a matter of any body's guess, and it could not permit any authority to apply provisions of S.26 of the Customs Act, 1969 to make indiscriminate roving and fishing inquiry, irrespective of fact whether any determination of legality or illegality in import or export of funds with which vehicle was acquired; was to be determined---Even in case of suspicion of commission of illegality, details should be provided to the party, to enable him to have an opportunity to produce all relevant documents, and disclose information---Depending on facts and circumstances of the case, any notice without disclosing any fact or particulars for which information or documents were required, would be in violation of principles of natural justice, and could be struck down as illegal and without jurisdiction.

(c) Interpretation of statutes---

----Where, a statute prescribed particular mode or mechanism to do an act, same was to be done in the same manner; and if done without framework of legal formalities, it should not have warrant of law---Any action beyond the sphere allotted to the court by warrant of law, and outside the area within which the law recognized the privilege to error, then such action would amount to "assertions of power unwarranted by law".

Farooq Talib Hussain and Asim Muneer Bajwa for Appellants.

Muhammad Raza (A.C.) and Malik Safdar for Respondents.

Date of hearing: 16th February, 2015.

2015 P T D (Trib.) 2460

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I

ZAHOOR ENTERPRISES

Versus

DEPUTY COLLECTOR (II) and 2 others

Customs Appeal No.K-3098 of 2013, decided on 21st November, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 81, 82 & 194-A---S.R.O. No. 494(I)/2007 dated 9-6-2007---Determination of customs value of imported goods---Provisional assessment of duty---Importer filed Goods Declaration for clearance of imported goods---Declared description of goods was confirmed by the department, but declared value of the same was found on lower side than the normal value---Goods were released provisionally under S.81 of the Customs Act, 1969 at total enhanced value and matter was referred to the Directorate General of Customs Valuation for investigation and determination of fair value as per law---Importer was found to have short paid/recoverable duty and taxes---Adjudicating Authority finalized the provisional assessment as per enhanced value determined by Directorate General of Customs Valuation; and ordered the importer to pay off the balance amount---Appellate Authority, having dismissed appeal of the importer against order-in-original of the Adjudicating Authority---Validity---Contention of the importer was that the declared value of the consignment was the transaction value, which was higher, but even then the value was enhanced arbitrarily without disclosing the evidence or giving reasons for such enhancement---Powers to convert the provisional determination into final determination, was vested with the appropriate Officers of the clearance/Executive Collectorate---S.R.O. No. 494(I)/2007, dated 9-6-2007 which had prescribed the function of the Directorate General of Customs Valuation, did not envisage any role for the said Officer under S.81 of the Customs Act, 1969---Exchange of information/data, or provision of advice by the Directorate General of Valuation to the concerned Collectorate, upon latter's initiative, was an internal activity between the two formations of the department---Mere posting of certain advice electronically on the system by Valuation Officer, would not meet the requirement of final determination of duty and taxes---Such power was only to be exercised by the appropriate Officer in the manner as outlined under S.81 of the Customs Act, 1969; and within stipulated period of six months---Final determination in the present case, was made after expiry of stipulated period of six months, even though the extention of 30 days had been sought by the Authority/department---Final determination, in circumstances, was hopelessly time barred, which was void and unlawful---Order passed by the hierarchy of customs, which was patently infested with legal infirmities, had no legal warrant under the law which was set aside.

Messrs Hassan Trading Company v. Central Board of Revenue, Government of Pakistan, Islamabad and others 2004 PTD 1979; Messrs Dewan Farooque Motors Ltd. Karachi v. Customs, Excise and Sales Tax Appellate Tribunal Karachi and others 2006 PTD 1276; Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116; 2007 PTD 2092; Collector of Customs, Lahore and others Messrs Shafiq Traders and another 2011 SCMR 967; SUS Motors (Pvt.) Ltd., v. Federation of Pakistan 2011 PTD 235; Messrs Salman Tin Merchant, Karachi v. Collector of Customs, Karachi 2014 PTD 438 and Messrs Wall Master v. The Collector of Customs Appraisement Karachi 2005 PTD 2573 ref.

M.H. Awan for Appellants.

Shamim, P.A. for Respondents.

Date of hearing: 30th October, 2014.

2015 P T D (Trib.) 2474

[Customs Appellate Tribunal]

Before Chaudhry Muhammad Tariq, Chairman and Khalid Mahmood, Member Technical-I

Messrs A. QAYYUM AND SONS and 2 others

Versus

COLLECTOR OF CUSTOMS COLLECTORATE OF CUSTOMS (ADJUDICATION-II) and 2 others

Customs Appeals Nos.K-988 to K-990 of 2013, decided on 8th January, 2015.

Customs Act (IV of 1969)---

----Ss. 32, 156(1)(14), 194-A, 202 & 209---S.R.O. 480(I)/2007 dated 9-6-2007, S.R.O. 525(I)/2008, dated 11-6-2008---Imposition of penalties on Clearing Agents on allegation of facilitating the importer in alleged illegal designs---Collector Customs (Adjudication) after fulfilling codal formalities, imposed penalty of Rs.100,000 each, who were Customs House Clearing Agents, on ground that they facilitated the importer in his illegal designs---Validity---Sole function of Clearing Agent was to prepare the goods declaration on the basis of import documents, showing the description of goods, its weight, quantity, value and PCT Headings, which they had done---Importer had sold the imported raw material in open market, instead of using the same in manufacturing---Clearing Agent was not responsible for the subsequent treatment of goods imported by his client, whether the importer utilized the imported goods in manufacturing or disposed of in the local market---Cogent evidence was required for holding a Clearing Agent liable for act of commission or omission---Imposing of penalty of Rs. 100,000 on each appellant/Clearing Agents in circumstances, was unjustified---Prosecution had failed to point out any evidence of mens rea against appellants/Clearing Agents---Appellants were charged on a presumptive collusion, which was not warranted under the law---Impugned order to the extent of imposing penalty upon the Clearance Agents/appellants, was set aside.

Muhammad Younis Rao for Appellants.

Abdul Rashid I.O. for Respondents.

Date of hearing: 7th January, 2015.

2015 P T D (Trib.) 2480

[Customs Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

Messrs KHYBER TEA AND FOOD COMPANY and others

Versus

COLLECTOR OF CUSTOMS (APPEALS) and 2 others

Cus. No.119/PB of 2011, decided on 3rd December, 2014.

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

----Ss. 2(s), 16, 26, 156, 157, 180, 187, 193-A, 194-A & 215---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)(3)---Seizure and confiscation of goods---Customs squad, seized the goods in question for violation of Ss.2(s), 16 & 157 of Customs Act, 1969 read with S.3(1) of the Imports and Exports (Control) Act, 1950---Adjudicating Authority in order-in-original confiscated goods in question---Appeal filed by appellant/importer against order of Adjudicating Authority, was dismissed---Finding of Adjudicating Authority was that production of documents by appellant was an afterthought---Validity---Seizing Officer was duty bound to issue notice under S.26 of Customs Act, 1969 asking about the documents of legal import and lawful possession of goods from the appellant; and should have given at least period of 7 days to the appellant for production of required documents---Goods declaration produced by appellant had proved that goods in question was imported by another company; and that appellant had purchased the same from said company---Goods in question, in circumstances, was a legally imported, and all the relevant duty and taxes had already been paid---Goods in question could not be treated as "smuggled goods"---Locally manufactured goods and imported goods purchased from the local market, were not liable to confiscation---Appellate Authority under S.193-A(3) of Customs Act, 1969, was bound to pass order within 120 days from the date of filing of appeal or within further extended period of 60 days, prior to expiry of 120 days but said Authority passed order after 10 months of filing of appeal---Appellate Authority, had neither got fixed any extended period, nor recorded any reasons for passing order-in-appeal long after period of 120 days---Order-in-appeal, passed by Appellate Authority, being time-barred, was not maintainable---Adjudicating Authority, had observed that it was forced to hold his opinion for ordering the confiscation of the seized goods, as, a number of cases were made out against the appellant; and there had been litigation between the department and the appellant---Said observations were neither plausible nor convincing, because appellant had discharged his onus of proof within the meaning of S.187 of the Customs Act, 1969; who had successfully met with the burden to prove the legal import---Burden to prove smuggling, had shifted to prosecution, who had failed to prove the charge, by producing a direct evidence against the appellant---Prosecution had failed to produce any evidence, which could prove that the import of such kind of goods was prohibited or restricted by Federal Government---Mere factum of importation or exportation of certain goods being prohibited by law, would not amount to smuggling---Goods in order to be smuggled, must be notified by the Federal Government under S.2(s) of the Customs Act, 1969---Department having failed to prove case against the appellant, punishable under S.156(1)(8)(89) & S.157, appeal was accepted and impugned order-in-original and order-in-appeal were set aside.

2013 PTD (Trib.) 1636; 2001 YLR 635; 1995 SCMR 387 and 2003 PTD 2116 ref.

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

----S. 193---Appeal before Appellate forum---Scope---Appeal, basically was a complaint to the appellate forum against the lower forum---Appellate Authority did not carefully peruse the record, and had based its findings on the observation of the Adjudicating Authority---Appellate forum was legally bound to see as to what mistake, had been made by the lower forum; and what illegality had been committed by it.

Ateeq ur Rehman, Syed Sikandar Hayat Shah, Pir Alam Shah, Consultant Mufti Law Associates Fakhr-e-Alam Paracha, Managing Director for Appellants.

Naseer Khan, Superintendent Customs for Respondents.

Date of hearing: 1st September, 2014.

2015 P T D (Trib.) 2584

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I

Messrs STAR IMPEX, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-512 of 2014, decided on 10th April, 2015.

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

----S. 24-A---Decision by public functionaries---Principles---If any authority, court or tribunal gave findings of fact which were not based on material available on record such findings of fact were illegal, arbitrary, perverse, violative from established principles of appreciating of evidence and not sustainable in law---Every judicial or quasi-judicial findings would be based on reason containing justification for finding in order---Orders which did not contain rebuttal on ground advanced and decision/judgments relied upon by the party and also not containing substantial reasons and did not show that these were passed on objective consideration would be treated as illegal, void, arbitrary and result of misuse of authority vested in public functionary.

2007 PTD 2500; 2004 PTD 1973; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2005 PTD 2519; 2005 PTD 1189; PLD 1995 SC (Pak) 272 and 1984 SCMR 1014 rel.

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

----Ss. 32(1), 32(2) & 179---SRO 886(I)/2012 dated 18-7-2012---Allegation of misdeclaration---Contents of show-cause notice showed that there was no revenue loss by virtue of alleged mis-declaration---Importer had not submitted any forged/false documents/declaration which was evident from show-cause notice---Validity---Sections 32(1) & 32(2) of Customs Act, 1969, were not to be read in isolation, instead in conjunction with S.32(2) or S.32(3) of Customs Act, 1969---Powers vested with Department under S. 179 of Customs Act, 1969 had not been withdrawn through S.R.O. 886(I)/2012 dated 18-7-2012---According to S.R.O. 886(I)/2012 cases involving technical violation of import or export restriction without involvement of any evasion of duty and taxes, would not be adjudicated by adjudicating officer of Customs---Powers of adjudication were specific and empowered by statute.

Collector of Customs (Exports) and another v. R.A Hosiery Works 2007 PTD 2215 rel.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; 2006 PTD 978; PLD 1971 SC 184; Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68 and Collector of Customs (Exports) and another v. R.A. Hosiery Works 2007 PTD 2215 ref.

(c) Interpretation of statutes---

----Where there was conflict between special and general provision of law, special law should prevail---Power of adjudication was special in nature and it could not be eclipsed by any other general provision.

Lt.-General (Retd.) Shah Rafi Alam v. Lahore Race Club 2004 CLD 373 rel.

(d) Interpretation of statutes---

----Absurdity/redundancy in a statute---Court could supply construction with a view to avoid absurdity---Redundancy had to be avoided in respect of any provision of statute.

Khalid Qureshi v. UBL 2001 SCMR 103 and East West Steamship v. Queen Land Insurance PLD 1963 SC 663 rel.

2002 PTD 2457 and PLD 1973 SC 236 ref.

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

----Ss.4 & 179---S.R.O. 371(I)/2002, dated 15-6-2002---Redundancy in respect of powers conferred under S.179 of Customs Act, 1969 and S.R.O. 371(I)/2002, dated 15-6-2002---Effect.

(f) Interpretation of statutes---

----Where there was a conflict between two provisions of a statute, later provision would prevail and given precedence.

East West Steamship v. Queen Land Insurance PLD 1963 SC 663 rel.

(g) Jurisdiction---

----Scope---Law favour actions of authorities to be confined to their own spheres of jurisdiction conferred by statute---Action taken by a state functionary beyond its ambit of jurisdiction was nullity---Where an inferior tribunal or court had acted wholly without jurisdiction or taken any action beyond the sphere allotted to tribunal by law and therefore outside an area within which law recognized a privilege to err then such action amounted to usurpation of power warranted by law and such an act was nullity and a result of purported exercise of authority which had no legal effect whatsoever---Appeal allowed, accordingly.

East West Steamship v. Queen Land Insurance PLD 1963 SC 663; Abida Rashid v. Secretary Government of Sindh PLD 1995 Kar. 587; E.A. Avans's case PLD 1964 SC 536; 2001 SCMR 838 and 2003 SCMR 1505 rel.

Nadeem Ahmed Mirza for Appellants.

Noor Akbar AO and Abdul Ghani EO for Respondents.

Date of hearing: 21st January, 2015.

2015 P T D 215

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs H.H. BROTHERS, LAHORE

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Review Petition No.47 and Complaint No.733-K of 2014, decided on 6th November, 2014.

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

----S. 9(2)(a)---Complaint filed before Federal Tax Ombudsman---Bar of jurisdiction---Scope---Matter sub-judice before the High Court---Reference application filed by the Revenue department was already pending before the High Court at the time when complainant filed his complaint before the Federal Tax Ombudsman---Complaint filed before Federal Tax Ombudsman in a matter being sub-judice before a competent forum was not maintainable---Review petition was dismissed accordingly.

No.203/2010-Law-(FTO) dated 18-7-2014; No. 85/2012-Law-(FTO) dated 26-3-2014; No. 75/2012-Law-(FTO) dated 26-3-2014; No.218/2010-Law-(FTO) dated 27-3-2014; No. 92/2009-Law-(FTO) dated 25-3-2014 rel.

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

----S. 10(3)---Complaint filed before Federal Tax Ombudsman---Time barred---No special circumstances to condone delay---Complaint filed before Federal Tax Ombudsman was time barred as the same was filed after 3 years of arising of cause of action---Complainant had not advanced any reason which could be considered a special circumstance to condone the delay---Review petition was dismissed accordingly.

M. Nadir Khan, Advisor Dealing Officer.

Obaydullah Mirza Authorized Representative.

Rehmatullah Vistro, Deputy Collector for Departmental Representative.

ORDRE-IN-REVIEW

ABDUR RAUF CHAUDHRY, (FEDERAL TAX OMBUDSMAN).---The petitioner (complainant) feeling aggrieved by rejection of his complaint being hit by the bar of jurisdiction under section 9(2)(a) of the FTO Ordinance and time barred in terms of section 10(3) of the FTO Ordinance has invoked the provisions of section 14(8) of the FTO Ordinance by filing of petition for review of the Findings/Recommendations alleging that the same are based on mala fide and intellectual dishonesty. According to the petitioner Findings/ Recommendations are in derogation of earlier Findings/Recommenda-tions and orders on representation under section 32 of FTO Ordinance. The petitioner has relied on orders passed by the Hon'ble President of Pakistan:--

"Nos. C-485-K/2005, Order No. 78/2007-law (FTO) dated 31-3-2007, F.No.51/05-law (FTO) dated 21-4-2007, 107/2007-97/2010, 111/KHI/ST(31)522/2010, 131/KHI/ST(61)/360/2012, 2013 PTD 1770, 2013 PTD 2341, 46/2011-law (FTO) dated 10-10-2013".

1. The Department (Deptt.) resisted the review petition and filed parawise comments supporting the Findings/Recommendations of the Federal Tax Ombudsman contending that the complaint was hit by bar of jurisdiction under section 9(2)(a) of the FTO Ordinance as the matter was subjudice before the High Court of Sindh, Karachi in reference application filed against the order which was sought to be implemented. According to the Deptt., the complaint was also time barred.

2. The parties during hearing before the Federal Tax Ombudsman reiterated averments of their pleadings. The complainant supporting his plea for implementation of the order of the Appellate Tribunal despite matter being subjudice before the High Court relied on the orders passed by the President on the Findings/Recommendations of the Federal Tax Ombudsman referred hereinabove and the order of the High Court of Sindh in Constitutional Petition No.D-4016/2013.

3. Submissions of the parties considered in the light of averments of their pleadings and the case-law on the issue. It is observed that the petitioner has neither disputed the fact that the complaint was filed after filing of reference application by the department and that the same is pending before the High Court nor he denied the legal position about complaint being time barred as the same was filed after 03 years of arising of cause of action based on the order dated 8-4-2011 passed by the Appellate Tribunal. He has not advanced any reason which could be considered special circumstance to condone the delay.

Adverting to the case-law relied by the complainant about taking cognizance of similar matters by Federal Tax Ombudsman despite the same being subjudice, it would suffice to observe that the Hon'ble President of Pakistan in recent orders passed on representations filed against FTO Findings/Recommendations in matters being subjudice or where remedy of appeal was available reversed the earlier view. For ready reference following orders are relevant:

(1) No.203/2010-Law-(FTO) dated 18-7-2014

(2) No. 85/2012-Law-(FTO) dated 26-3-2014

(3) No. 75/2012-Law-(FTO) dated 26-3-2014

(4) No.218/2010-Law-(FTO) dated 27-3-2014

(5) No. 92/2009-Law-(FTO) dated 25-3-2014

1. The later decision of President nullifies the earlier decisions and later decisions are binding which leave no room for taking cognizance of complaint where the matter is subjudice as the same is hit by bar of jurisdiction under section 9(2)(a) of the FTO Ordinance. The order dated 25-10-2013 passed by the High Court in Constitutional Petition No.D-4016 of 2013 is not relevant. The same was passed exercising constitutional jurisdiction whereas the Federal Tax Ombudsman exercise powers vested in him under FTO Ordinance read with FOIR Act, 2013 which bar the FTO to investigate or inquire into matters which are subjudice. The President in his recent orders applying the provisions of section 9(2)(a) of the FTO Ordinance has rejected complaints filed in subjudice matters whereafter, there remain no cavil about legal position that complaint in a matter being subjudice before a competent forum is not maintainable.

2015 P T D 289

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs LUCKY CEMENT LTD. KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.319/KHI/Cust(59)1143 of 2014, decided on 17th September, 2014.

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

----S. 10---Federal Ombudsman Institutional Reforms Act (XIV of 2013), S.11---Complaint---Manufacturing of Cement---Interim relief, grant of---Complainant had sought indulgence of the Ombudsman against a letter, issued by Deputy Collector (Exports); whereby the Private Manufacturing Bond Warehouse Licence, had been amended by deleting shredded tyre scrap (cut into pieces) from manufacturing bond licence---Contention was that shredded tyres were used as fuel; and it was not an input material for manufacturing of cement to be used as input material---Complainant being aggrieved by said letter filed complaint to the ombudsman, along with application for grant of interim relief by suspending the operation of impugned letter, whereby facility of manufacturing bond, was withdrawn---Documents available on record, prima facie, supported the plea of the complainant---Circumstances, explained by the complainant, reflected that, if the clearance of shredded tyres was withheld, the complainant would face irreparable loss---Interim injunction was granted in favour of the complaint by suspending the operation of impugned letter in circumstances.

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

M. Afzal Awan, Authorized Representative.

Nemo for Departmental Representative.

2015 P T D 371

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhary, Federal Tax Ombudsman

Messrs MIMA KNIT (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.280/KHI/ST(132)/1002/2013, decided on 5th August, 2013.

Sales Tax Act (VII of 1990)---

----Ss.10, 7(1), 2(14) & 2(22A)(e)---Sindh Sales Tax on Services Act (XII of 2011), S.26---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund of input tax---Revenue failed to settle sales tax refund filed on account of input adjustment---Revenue contended that sales tax paid to Sindh Revenue Board under Sindh Sales Tax on Services Act, 2011 was claimed as an input tax and the same was deferred by the STARR system for non-verifiability; that 'provincial sales tax' meant Sindh Sales Tax Ordinance, 2000 and not Sindh Sales Tax on Services Act, 2011; and that until and unless necessary amendment was introduced in the Sales Tax Act, 1990 by substituting Sindh Sales Tax Ordinance, 2000 with Sindh Sales Tax on Services Act, 2011 and proper linkage was established between Federal Board of Revenue database and Sindh Revenue Board portal, adjustment of sales tax input could not be allowed to the taxpayer---Validity---Powers to collect sales tax on services were delegated to the provinces under the Constitution---Federal Board of Revenue was required to have allowed adjustment/refund to the taxpayer in lieu of sales tax collected on services by the Sindh Revenue Board---Both the Sindh Revenue Board and Federal Board of Revenue, in order to provide access to their respective databases for the purpose of verification of input adjusted, had already issued such authorization---Federal Board of Revenue had categorically stated that input adjustment of sale tax would be allowed at the time of filing return in accordance with S.7(1) of the Sales Tax Act, 1990---As Federal Board of Revenue had failed to workout 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, this had led to inordinate delay, neglect, inattention and inefficiency in the administration of discharge of duties and responsibility on the part of Federal Board of Revenue which being systemic one needed to be addressed on priority basis---Inordinate delay on the part of Federal Board of Revenue to devise modalities for settling sales tax adjustment claims of the taxpayers was tantamount to mal-administration in terms of S.2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Federal Board of Revenue to (i) provide database linkage as mutually agreed between Sindh Revenue Board and Federal Board of Revenue so as to resolve the systemic issue and (ii) direct the Chief Commissioner concerned to process and settle the complainant's claims; as per law.

Manzoor Hussain Kureshi, Adviser Dealing Officer.

Imran Iqbal for the Complainant.

Jameel Ahmed Consultant, Brohi, DCIR and Zameer Khalid, Legal Consultant, SRB for Respondents.

2015 P T D 455

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

HAMSONS INDUSTRIES

Versus

SECRETARY REVENUE DIVISION ISLAMABAD

Complaint No.290/Khi/Cust/(98)/1031 of 2013, decided on 14th September, 2013.

Customs Act (IV of 1969)---

----S.81(1)(2)(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 10(4)---Provisional Assessment---Finality of---Entitlement of the complainant for refund of differential amount---Complainant/importer, had sought refund of customs duty and allied taxes allegedly recovered illegally by the department against the security deposited by the complainant for release of his goods under Provisional Assessment order---Contention of complainant was that department having failed to finalize the Provisional Assessment within period of one year, as prescribed under S.81(2) of the Customs Act, 1969, the value declared by the complainant had attained finality; and complainant was entitled for refund of differential amount deposited by him for release of goods, which was illegally recovered by the department---Validity---After Provisional Assessment, the complainant did not pursue the matter, and no evidence was produced by him to support his declared value and that prescribed period of one year had expired---After expiry of prescribed period, Provisional Assessment, which included the declared value, as well amount secured, had attained finality under S.81(4) of Customs Act, 1969---Recovery of amount secured through PDC, could not be termed as illegal and no case for refund of the same, was made out---Compliant was rejected.

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

Naseer A. Malik, Authorized Representative.

M. Faisal, Assistant Collector, Departmental Representative.

2015 P T D 485

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

IQ STUDIO (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.837/LHR/IT(608)/1473 of 2012, decided on 4th February, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.12, 153 & 171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 10---Excess deduction of income tax at source---Delayed refund---Maladministration---Refunds in the case arose as a result of excess deduction of income tax at source on payments received for service rendered---Refund pertaining to tax years 2007 to 2009, was issued by the department on 17-8-2012, which prima facie was delayed one---Refund claim was required to be processed within the timeframe, stipulated in the statute after the deemed assessment made under S.120(1) of Income Tax Ordinance, 2001---In the tax year 2009, the time limit was 45 days, after the return was admitted and acknowledgment issued to the taxpayer---Refund due for tax years 2007 to 2009, having not been determined by the department within the stipulated time period of 45 days from the date of deemed assessment in each year, delay had occurred, and compensation under S.171 of Income Tax Act, 2001, was payable---Compensation amount was to be reckoned from the date of deemed assessment, and not from the date of any order for issuance of refund passed belatedly by the department---Delay in issuance of refund, was tantamount to "maladministration" under S.2(3)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Such delay also created the right to receive compensation under S.171 of Income Tax Ordinance, 2001---Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to issue compensation due as per law and report compliance within 30 days.

2010 PTD (Trib.) 519 ref.

Muhammad Munir Qureshi, Advisor, Dealing Officer.

Muhammad Waseem Chaudhry Authorized Representative.

Usman Asghar, DCIR, Departmental Representative.

2015 P T D 531

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

COLLECTOR OF CUSTOMS, KARACHI

Review Petition No.8 of 2014 in Complaint No.126/ISD/CUS(15)/1748 of 2013, decided on 27th October, 2014.

Customs Act (IV of 1969)---

----Ss.32-A & 195---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9, 10(4), 14(8) & 16---Maladministration---Review petition---Collector of Customs, had filed petition under S.14(8) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, for review of Federal Tax Ombudsman's findings and recommendations on certain grounds contending that impugned findings were harsh---Most critical issues involved in the case, were; firstly, whether, delay had occurred in payment of duty drawback to the complainant for export of socks, etc., and whether impugned findings and recommendations issued by Federal Tax Ombudsman, were harsh; secondly, whether it was desirable on the part of the Customs Authorities to ask the complainant to withdraw the complaint to Federal Tax Ombudsman, thirdly, whether complainant had attempted to defraud the Government Exchequer of the huge amount of duty drawback and fourthly, whether issuing show-cause notice to the complainant was justified and lawful, while complaint to the Federal Tax Ombudsman was under investigation---Validity---Regarding firstly, there could be no doubt that payment of duty drawback, was excessively delayed in 20 claims pertained to the years 2010 and 2011, and 4 claims pertaining to the period after 2012; three other claims of the complainant were also pending due to the failure of the Customs Authorities to inform the complainant about the change in the refund system under the "Pakistan Customs Computerized System (PaCCS)" and its replacement---Such acts of omission and commission by the Customs Authorities, constituted "maladministration" in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Said inordinate delay by Tax functionaries in the settlement of duty drawback claims of exporter without any fault, was much more serious "maladministration" to be condoned, merely on the ground of being a legacy issue of transition from one Computerized System to another---Impugned findings of Federal Tax Ombudsman, were not harsh---Regarding, secondly, Assistant Collector asked the complainant to withdraw his complaint, as department was co-operating with him to settle his outstanding claims; and that it would cause a lot of expenditure to the Government due to travel of Gazetted Officer from Karachi to Islamabad for attending hearing proceedings---Request to withdraw the complaint would similarly cause a lot of cost to the exporter (complainant) to travel from Haripur (Khyber Pakhtunkhwa) to Karachi to attend the hearing proceedings for defending himself against allegations of "fiscal fraud", which would also cause, lot of emotional and reputation loss to valuable exporter, who had an unblemished track record as exporter and taxpayer---Request of department, was not reasonable, in circumstances---Regarding, thirdly, the complainant had not filed duplicate claims, but he just wanted information, whether his claims, had been paid, which was his right---Exercise of such right, could not be treated as an attempt to defraud the Government Exchequer, as neither duplicate claims had been filed, nor the complainant had even insisted on payment of those 19 claims, which were stated by the Departmental representative to have been paid already---No room was available, in circumstances, for charging the complainant with "fiscal fraud" under S.32-A(1)(a) of Customs Act, 1969---Regarding fourthly---Fact was that Assistant Collector, asked the complainant to withdraw his complaint, and only after two days of declining of the Assistant Collector's request to withdraw the complaint, show-cause notice was issued against the complainant, without any factor charge; issuing show-cause notice, in circumstances, was an act of reprisal by the Customs Authorities for refusal by the complainant to accept the Assistant Collector's request for withdrawal of the complainant---Acts of department, having constituted a very serious "maladministration" in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, FBR was recommended; to call for the record of the case in exercise of the powers under S.195 of the Customs Act, 1969, and withdraw the show-cause notice issued by Assistant Collector; to initiate disciplinary proceedings for issuing an unjustified and unlawful show-cause notice, as a measure of reprisal for taxpayer's refusal to comply with unlawful requirement to withdraw the complaint; convert the matter into a case study for training the Customs Officers; and report compliance within specified period.

Yasin Tahir, Senior Advisor Dealing Officer.

Malik Muhammad Fareed, CEO and Malik Haroon Fareed, Authorized Representatives.

Dr. Aftab Ahmed Bhatti, Addl. Collector and Ms. Mona Iffat Baloch, Deputy Collector Departmental Representatives.

2015 P T D 563

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhary, Federal Tax Ombudsman

MUHAMMAD SAJID MINHAS

Versus

SECRETARY, REVENUE DIVISION

Complaint No.322/LHR/ST(90)/768 of 2014, decided on 18th September, 2014.

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

----Ss. 2(3)(i)(ii) & 10(1) & (4)---Delay in settlement of refund claim---Maladministration---Case of complainant remained pending in a wrong zone for 9 months, which constituted maladministration on the part of Regional Tax Office---Complainant was made to suffer without any fault on his part---Reminders of the complainant to the Chief Commissioner also bore no fruit---Neglect and inefficiency caused delay in assessing correct jurisdiction to the case for settlement of the refund claim was tantamount to maladministration in terms of S.2(3)(i)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue, was recommended to direct the Chief Commissioner, Regional Tax Office to; resolve the issues involved in the case on priority basis to settle the refund claim; to fix responsibility for delay of 9 months in settlement of jurisdiction issue and take disciplinary action against those found responsible for that; and report compliance within 30 days.

Umar Farooq, Advisor Dealing Officer.

M. Shabbir, Sheikh Authorized Representative.

Saima Munawar, DCIR Departmental Representative.

2015 P T D 858

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

UMAR HAYAT

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Petition No. 38 of 2014 in Complainant No.929/LHR/ST(303)/1693 of 2013, decided on 27th November, 2014.

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

----Ss. 2(3), 9 & 14(8)---Sales Tax Act (VII of 1990), Ss.3-B & 66---Rejection of complaint on ground of laches---Review petition---Jurisdiction of Federal Tax Ombudsman---Scope---Federal Tax Ombudsman vide his findings/recommendations having rejected complaint filed by the petitioner, without embarking upon the merits of the matter, petitioner had filed review petition against rejection order---Matter in the case related to auction lots of trees, mainly comprising timber-wood in the form of dead/dry standing and fallen trees and firewood---Only a small component of those lots comprised green trees---Green trees could qualify for sales tax exemption, and timber wood and firewood was chargeable to Sales Tax---Description given by the complainant in his complaint as 'standing trees' was misleading---Appropriate description, should have been "dead/dry trees" "timber and firewood", and "green trees"---Complainant/petitioner's attempt to mislead the Federal Tax Ombudsman, could not be supported---Matter involving interpretation of law and determination of facts for tax assessment, same fell outside the purview of the Federal Tax Ombudsman; as its jurisdiction was barred in terms of S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Findings of the Federal Tax Ombudsman, were upheld, in circumstances.

PLD 1998 SC 64; Govt. of KPK v. Khalid Mehmood 2012 SCMR 619 and Shahtaj Sugar Mills Ltd. v. Government of Pakistan 2009 PTD 1544 ref.

Umar Farooq, Advisor Dealing Officer.

M. Bashir Malik, Authorized Representative.

Shaukat Mehmood, Chief Commissioner Departmental Representative.

2015 P T D 1087

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

MUHAMMAD HAFEEZ

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.182/FSD/ST(59)/1270 of 2014, decided on 27th February, 2015.

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

----Ss. 2(3)(ii) & 10---Sales Tax General Order No.3 of 2004 dated 12-6-2004---Sales Tax General Order No.35 of 2012 dated 30-6-2012---Suspension of Sales Tax Registration Number and National Tax Number (NTN)---Maladministration---Complainant alleged that his Sales Tax Registration Number and National Tax Number were suspended without any show-cause notice and without communicating any reason, which constituted "maladministration" as defined in S.2(3)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Record had shown that department suspended the status of the registered person (complainant) without passing written order and failed to issue show-cause notice within 7 days of suspension, as required under Sales Tax General Orders Nos.3/2004 and 35/2012---Departmental Representative also admitted that no show-cause notice and opportunity of being heard was provided to the complainant---Such action of the department tantamount to maladministration in terms of S.2(3)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Proceedings required under the law having not been initiated by the department, action in question was without any legal authority---Federal Board of Revenue was recommended to direct the Chief Commissioner to restore registration of the complainant within a week and any further action required to be taken against the complainant, could be taken after affording him proper opportunity of hearing and report compliance within two weeks.

Mian Munawar Ghafoor, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Mukhtar Ahmad Khalid, IRO Departmental Representative.

2015 P T D 1335

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

QASIM HUSSAIN ALI

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.23/LHR/CUS(04)/65 of 2015, decided on 12th March, 2015.

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

----Ss. 2(3) & 10(1)(4)---Sales Tax---Notification S.R.O. 727(I)/2011, dated 1-8-2011---Delay in grant of registration/status as manufacturer and failure to return post - dated cheques deposited as security by the complainant---"Maladministration"---Complainant alleged mal-administration on the part of Federal Board of Revenue for delay in grant of registration status as manufacturer and for not returning post-dated cheques deposited as security for sales tax in terms of Condition (i) of Sales Tax Notification No. S.R.O. 727(I)/2011 dated 1-8-2011---Complainant applied for registration as 'manufacturer' in Feb. 2014 and Federal Board of Revenue showed him as 'manufacturer (under process)' in the sales tax profile---Machinery was imported in April and May 2014, but in May,2014 the complainant withdrew his request for addition of 'manufacturer' status to his profile---From May, 2014, when the complainant withdrew his request, till the time of addition of 'manufacturer' status to his profile in Oct., 2014, the complainant remained as "importer (commercial)"---Benefit of Condition (i) of Sales Tax S.R.O. 717(I)/2011 dated 1-8-2011 could not be extended to the complainant.

Umar Farooq, Advisor Dealing Officer.

Qasim Hussain Ali, Complainant.

Abdul Rashid Khan, A.R. Authorized Representatives.

Mst. Sobia Kiran, DC Departmental Representatives.

Zaigham Abbas, Suptt. Departmental Representatives.

2015 P T D 1674

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs NEW SHALIMAR STEEL INDUSTRIES (PVT.) LTD.

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.72/LHR/ST(26)/147 of 2014, decided on 8th May, 2015.

Sales Tax Act (VII of 1990)---

----Ss.10 & 74---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10---Complaint---Post-refund audit---Withdrawal of complaint---Obtaining inadmissible refund of huge amount of Rs.102.04 million by concealment of duty free/sales tax free import of input materials by complainant company was under post refund audit with Directorate General of Inland Revenue Audit under instructions of Federal Board of Revenue---No justification existed for allowing withdrawal of complaint at such stage---Federal Ombudsman recommended the Directorate General of Inland Revenue Audit to expedite post-refund audit of complainant company to complete it within a reasonable period of time---Ombudsman also recommended to recover inadmissible amount of refund obtained through concealment of duty free/tax free import of input materials and to proceed under law against those found responsible for fraudulent claim of refund---Withdrawal of complaint was rejected in circumstances.

CST, Zone-A, Lahore v. Chenab Textile Mills Ltd. (1980) 42 Tax 140 and 2007 SCMR 818 ref.

Umar Farooq, Advisor Dealing Officer.

Akram Niazami, Faisal Naseer Rana and Shahid Rafique Authorized Representatives.

Asim Majid Khan, CIR Departmental Representative.

2015 P T D 1765

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Syed AMJAD ALI SHAH

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.140/KHI/CUS(39)/493 of 2015, decided on 4th June, 2015.

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

----S. 10(1)---Procedure for redressal of grievances---Maintainability of complaint before Federal Tax Ombudsman---"Aggrieved person"---Scope---Import of vehicle---Complaint regarding maladministration by Customs Collectorate of Appraisement in the matter of clearance of imported vehicle was filed by clearing agent for the importer---Contention of the Department was that clearing agent was not an "aggrieved person" in terms of S. 10(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Held, that importer of the vehicle was the "aggrieved person" and the clearing agent could not be termed as "aggrieved person" in terms of S. 10(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2001 and according to said section, a complaint shall be made in writing on solemn affirmation of oath by the person "aggrieved" or in case of such a person's death, by his legal representative---Complaint in the present case was filed by the clearing agent as "aggrieved person" and not as agent of the actual importer---Complainant, in the present case, had not been filed by any authorization from the importer----Section 10(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, therefore, did not permit treatment of clearing agent as "aggrieved person"---Complaint was therefore not maintainable and was rejected, in circumstances.

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

Syed Amjad Ali Shah and Muhammad Asif Authorized Representatives.

Asfandyar Khan, Deputy Collector Departmental Representatives.

2015 P T D 2141

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

MUHAMMAD ALI

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.452/KHI/ST(236)/1518 of 2014, decided on 10th April, 2015.

Sales Tax Act (VII of 1990)---

----Ss. 2(14)(37), 3, 7, 8(1)(d), 21(3) & 45-A---Sales Tax Rules, 2006, R.12(5)---S.R.O. 555(I)/2006, dated 5-6-2006---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10---Issuance of notices on the issues already adjudged---Complaint had been filed against Commissioner for declaring the issuance of show-cause notices as void ab initio on the issues already adjudged by Appellate Authority---Allegation was that complainant had claimed input tax on invoices of a corporation, which was blacklisted by FBR, and that input tax claimed by the complainant was inadmissible---Order-in-original passed by Adjudicating Authority against the complainant, was set aside by Appellate Authority on the ground that supplier was operative at the time of transaction---Department did not prefer second appeal against judgment of Appellate Authority, but despite that fresh show-cause notices were issued against complainant, against which complaint had been filed---Appellate Authority, while setting aside order-in-original, had explicitly found that the supplier was operative, hence disallowance of input tax was uncalled for and unwarranted---In view of unambiguous decision of Appellate Authority, which had attained finality as no second appeal was filed by the department, no justification existed to serve impugned show-cause notices on the complainant, on the same issue and start assessment proceedings afresh---Issuing fresh show-cause notices on same allegations already decided, appeared to be not covered under the law without re-opening the said appeal order by Federal Board of Revenue under S.45-A of the Sales Tax Act, 1990---FBR, was recommended by Federal Tax Ombudsman to direct Chief Commissioner to withdraw impugned show-cause notices, issued on the already adjudged issues within 15 days' if FBR wanted to issue fresh show-cause notices, then it should re-open the order-in-appeal strictly in accordance with provisions of Sales Tax Act, 1990 and to report compliance within 21 days.

Imtiaz Ahmed Barakzai, Advisor Dealing Officer.

Ajeet Sundar and Nadir Husain Abro Authorized Representatives.

Nasir Khan, DCIR for Departmental Representative.

2015 P T D 2279

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

INAMULLAH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.88/LHR/CUS(06)/244 of 2015, decided on 3rd April, 2015.

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

----Ss. 2(3), 9(2)(a) & 10(1)(4)---Supreme Court Rules, 1980, O.XX---Seizure and confiscation of smuggled goods-Maladministration---Allegedly smuggled goods were seized along with the truck carrying those goods by Anti-Smuggling Organization---Adjudicating Authority, confiscated said goods and penalty of Rs.100,000 was also imposed on accused---Appellate Tribunal allowed redemption of seized goods and the truck against fine---Aggrieved by the order of Appellate Tribunal, department filed Reference before High Court---As no stay had been granted by High Court against said order of the Tribunal, complainants requested for implementation of Tribunal's order---Department having refused to release the goods and truck in question as per Tribunal's order, the complainants invoked the jurisdiction of Federal Tax Ombudsman alleging maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Reference filed by the department against order of the Tribunal, was pending adjudication---As the matter was sub-judice the complaint filed by the complainant, was not maintainable in terms of S.9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Bar of S.9(2)(a) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, was absolute, irrespective of whether stay had been granted or otherwise---Federal Tax Ombudsman, could not exercise jurisdiction to investigate or inquire into matters, which were sub-judice before court of competent jurisdiction---Federal Tax Ombudsman, accordingly declined assumption of jurisdiction---Complaint was rejected on account of ouster of jurisdiction in terms of S.9(2)(a) of the Ordinance.

Complaint No.60/LHR/ST(20)/132/2014; Mirdad of Kohistan v. FBR Complaint No .14/KPK/Cus(02)/381/2013 ; F. No.37/FTO . 2013 (Law Division No.50/2011-Law-(FT0)-C.No.28/Isd/Cust(05)/213/2011; Collector of Customs v. FTO and others Writ Petition No.2171-P/2014 and Messrs Khyber Spining Mills Gadoon v. Secretary, Revenue Division, Islamabad 2002 PTD 2646 ref.

Umar Farooq, Advisor Dealing Officer.

Ahmad Faraz Lone, Authorized Representative.

Mrs. Irum Sohail, DC and Saleem Ahmad Malik, Inspector Departmental Representatives.

2015 P T D 2331

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs DESCON OXYCHEM LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.234/LHR/ST(50)/712 of 2015, decided on 3rd September, 2015.

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

----Ss. 2(3) & 10---Sales Tax Act (VII of 1990), Ss. 10 & 67---Sales

Tax Rules, 2006, R. 26A(7)---Complaint against non-issuance of sales tax refunds and delay in issuance of sales tax refunds-- Maladministration---Additional payment (compensation) for delay in payment of refund claims---Contention of taxpayer inter alia was that Department was deliberately delaying issuance of sales tax refund Validity---Under R. 26A(7) of the Sales Tax Rules, 2006, normal refund cases filed under the STARR system needed to be processed within 38 days and if such claims were processed late, the department needed to pay an additional amount (compensation) under S. 67 of the Sales Tax Act, 1990---Federal Tax Ombudsman observed that the delay, in the present case, in processing of refund claims of taxpayer filed through the STARR system beyond 38 days was against S. 10 of the Sales Tax Act, 1990 and the Sales Tax Rules, 2006 and was tantamount to maladministration in terms of S. 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that the Federal Board of Revenue direct the concerned Commissioner to process the pending refund claims of the taxpayer immediately, and in case processing of said refund claims was delayed beyond 38 days after filing of the same, then payment of compensation/additional amount in terms of S.67 of the Sales Tax Act, 1990 was to be made to the taxpayer---Complaint was disposed of, accordingly.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Ch. Wasim Ismail, Authorized Representative.

Khurram Fakhar, ACIR, Departmental Representative.

2015 P T D 2348

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs NIAZI CNG COMPANY

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.147/LHR/IT(114)/417 of 2015, decided on 11th September, 2015.

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

---Ss. 2(3) & 10---Income Tax Ordinance (XLIX of 2001) Ss. 127 & 170---Complaint against non-issuance of income tax refund Jurisdiction of the Federal Tax Ombudsman---Scope---Contention of Department was that the complainant ought to have filed appeal before the first statutory Appellate forum and there was no cause for him to file complaint before the Federal Tax Ombudsman---Validity---­Department's contention that complainant / taxpayer was bound to file appeal before the Commissioner (Appeals) when refund claim was not disposed of within statutory time frame ignored the fact that taxpayer also had the option to file a complaint before the Federal Tax Ombudsman if Departmental maladministration was evident Federal Tax Ombudsman therefore, had jurisdiction in the matter.

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

----Ss. 2(3) & 10---Income Tax Ordinance (XLIX of 2001) Ss. 234A, 235, & 147---Non-issuance of income tax refund claim in relation to advance tax paid under S. 235 of the Income Tax Ordinance, 2001 on electricity bills by the complainant, which was CNG station---Validity--- Tax deducted under S. 235 of the Income Tax Ordinance, 2001 was adjustable or refundable as Advance Tax in view of provisions of Ss.147(4) & 147(4B) of the Income Tax Ordinance, 2001 and deduction of tax under S. 235 of the Income Tax Ordinance, 2001 did not fall under the Final Tax Regime but was adjustable like any tax deducted or paid under S. 147 of the Income Tax Ordinance, 2001----Federal Tax Ombudsman observed that it was not understandable as to why the Department had failed to direct the field formations to adopt a uniform policy in cases of CNG Stations as directed by the Federal Tax Ombudsman, from time to time and that the Department's inconsistent policy in case of CNG stations with regard to adjustment to tax deductions under Ss. 234A & 235 of the Income Tax Ordinance, 2001 in electricity bills was tantamount to maladministration in terms of S.2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that the Department direct the Commissioner to firstly; adopt a uniform policy in cases of CNG stations that was consistent with judgments of the Superior Courts and decisions of President of Pakistan in disposal of Departmental representations, secondly to process and dispose of the complainant's pending claim in light of the said uniform Policy and thirdly report compliance of the same within 30 days---Complaint was disposed of, accordingly.

2012 PTD 1003 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Sayyid Ali Imran Rizvi, Authorized Representative.

Manan Younas, DCIR, Departmental Representative.

2015 P T D 2401

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

ALI MANSOOR KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.24/LHR/IT(16)/66 of 2015, decided on 6th July, 2015.

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

----Ss. 2(3) & 10(1)---Jurisdiction of the Federal Tax Ombudsman---Scope--- Maladministration--- Fraudulently prepared document---Complaint against unauthorized CNIC access and unilateral issuance of NTN and subsequent amendment therein by the Department--- Contention of complainant was that the Regional Tax Office (RTO) issued a National Tax Number (NTN) on his name when he had not submitted any application for the same, and thereafter modified the same on basis of dubious documents-Validity-Objection to the Federal Tax Ombudsman's jurisdiction in the matter was misconceived as the present matter was much more than a simple case of forgery and certain Departmental functionaries had deliberately violated strict protocols for issuance of NTN and their motivation was wholly suspect, and such actions were contrary to the law and attracted provisions of S.2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, and violation of prescribed protocols was tantamount to maladministration and placed well within jurisdiction of the Federal Tax Ombudsman-Federal Tax Ombudsman observed that circumstances and highly suspect sequence of events, in the present case, raised many questions and strongly suggested foul play by the PRAL/Department functionaries and there existed a need that the Department take concrete steps to ensure that others were spared such harassment and that fraud perpetuated in the Department due to documents contrived fraudulently, came to an end---Federal Tax Ombudsman recommended that the Department conduct inquiry to determine as to how and by whom defective. NTN certificate was issued in the name of the complainant; and devise fool-proof Standard Operating Procedures with the consultation of the National Response Centre for Cyber Crimes (NR3C) wing of the Federal Investigation Agency to stop use of fraudulently prepared documents in the PRAL; and devise a policy to validate all NTNs on the PRAL database through a system of biometric verification-Federal Tax Ombudsman further recommended that copy of the present complaint and all documents be forwarded to FIA for initiating criminal investigation into forgery of complainant's signature---Complaint was disposed of, accordingly.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Waheed Shahzad Butt for the Complainant Authorized Representative.

Ms. Attiya Ali Khan, Secretary (IT-Wing), FBR, Lahore Department Representative.

2015 P T D 2443

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Ch. SHAHID MEHMOOD

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.131/LHR/IT(101)/394 of 2015, decided on 25th June, 2015.

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

----S. 10---Income Tax Ordinance, 2001, S. 114(6)---Filing of revised income tax returns---Obtaining written permission of Commissioner for filing revised income tax returns---Income tax refund---Complaint of maladministration on part of Income Tax Authorities for non-issuance of income tax refund---Complainant / taxpayer had filed revised returns for the tax years, 2011 to 2013 claiming enhanced refund and contended that the Department was not issuing the same-Contention of Department was inter alia that complainant had filed revised returns without obtaining prior written permission of the Commissioner in terms of S. 114(6) of the Income Tax Ordinance, 2001 ; hence the revised returns were invalid---Held, that examination of available record did not establish that prior approval of Commissioner Inland Revenue had been obtained and there was no confirmation by the Commissioner in such regard---Approval envisaged by law could not be deemed to have been obtained simply because the complainant/ taxpayer was able to file revised online returns for the tax year 2011 to 2103 and the law required that Commissioner's prior approval be obtained before- revised returns were filed---Commissioner, if he states that the prior approval had not been obtained and the complainant was unable to controvert the said statement with any documentary evidence that established that approval envisaged in law was in fact obtained, then the statutory requirement was not satisfied, as in the present case---Contention of complainant that the requirement of obtaining written permission was introduced vide an amendment in the Income Tax Ordinance, 2001 through the Finance Act, 2013 and was hence applicable with effect from tax year 2014 and was therefore not applicable to the revised returns of the complainant; was misconceived as said revised returns were filed in October, 2014 and at that time the statutory requirement of Commissioner's prior approval was in force as the Finance Act, 2013 became effective from 1st July, 2013 and any return revised after said time became subject to approval of the Commissioner---No case= for maladministration was made out and complaint was dismissed, in circumstances. [pp. 2445, 2446] A & B

Noon Sugar Mills Ltd. v. CIT 1990 PTD 768 and CIT v. Pakistan Tobacco Co. Ltd. 1988 PTD 66 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Shafiq Ahmad Chawala, Authorized Representative.

Manan Younas, DCIR Departmental Representative.

2015 P T D 2558

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

MUHAMMAD ASLAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.126/LHR/IT(96)/389 of 2015, decided on 30th July, 2015.

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

----Ss. 2(3) & 10---Income Tax Ordinance (XLIX of 2001) Ss. 170(4), 171 & 120---Non-issuance of tax refund---Maladministration---Scope---Contention of complainant/taxpayer was that despite completing all legal procedures and requirements, Department had failed to issue refund---Contention of Department was that the said claim of refund was required to be processed through the newly introduced Inland Revenue Information System ("IRIS"); and the same did not appear in the Commissioners inbox/folder; hence the refund in question could not be issued---Validity---After introduction of "IRIS", which was the new procedure for processing the refund claims, it was the Department's obligation to ensure that system was in line with provisions of law so that taxpayers' right to receive refund was not neglected---Withholding of legally admissible refund was to be disapproved---Department, in the present case, had admitted the inadequacy of the automated system, as the latest procedural technicalities brought about through automation system of "PRAL" were not compatible with legal provisions, nor the taxpayers had been made aware of such technical formalities through any publicity by the Department---Federal Tax Ombudsman observed that new techniques used by the "PRAL" should have been publicized through print and electronic media at least six months before implementation, which must be done now; before adopting such a measure, refusal to settle claims on basis of such technicalities would amount to arbitrary act tantamount to maladministration---Federal Tax Ombudsman further observed that Department must ensure that adequate publicity was made for awareness of taxpayer regarding technical/procedural changes for refund claims; that the IRIS was fully compatible with the provisions of the income tax law to facilitate the timely processing of refund; that the refund claim of the complainant was settled by removing irritants in the procedure as per law, within a period of three days and report compliance of the same within thirty days---Complaint was disposed of, accordingly.

1998 PTCL 354 rel.

Afzal Nau Bahar Kayani, Advisor Dealing Officer.

Abdul Waheed Shakir, Authorized Representative.

Dr. Athar Ishaq, DCIR, Departmental Representative.

2015 P T D 165

[High Court (AJ&K)]

Before M. Tabassum Aftab Alvi, J

LARAIB ENERGY LTD. through Chief Executive Officer

Versus

COMMISSIONER INLAND REVENUE (PROVINCIAL TAXES), MIRPUR, AZAD JAMMU AND KASHMIR and 5 others

Writ Petition No.1140 of 2014, decided on 2nd July, 2014.

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

----Ss. 25 & 72B---Federal Excise Act (VII of 2005), S. 46---Selection of case for audit---Commissioner Inland Revenue ("Commissioner")---Empowered to select and conduct audit---Such power was independent of the Federal Board of Revenue's ("Board") power to select a taxpayer for audit---By virtue of S. 25 of Sales Tax Act, 1990, Commissioner or officers of the Inland Revenue authorized by the Commissioner, were empowered to ask any tax payer to produce record or documents which were in his possession or control for the purpose of conducting audit--- Section 72B of the Sales Tax Act, 1990 (which empowered the Board to select a taxpayer for audit), was independent and never ousted the jurisdiction of the Commissioner (to select someone for audit) under S.25 of the Sales Tax Act, 1990.

OMV Pakistan Exploration v. Commissioner of Inland Revenue and otherS decided on 12-3-2013 and Federal Board of Revenue through its Chairman and others v. Messrs Jamal Pipe Industries (Pvt.) Ltd., Lahore Civil Appeal No.1032 of 2012 rel.

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

----S. 25-Income Tax Ordinance (XLIX of 2001), S. 177---Selection of case for audit---Commissioner Inland Revenue ("Commissioner")---Empowered to select and conduct audit---Section 177 of the Income Tax Ordinance, 2001 was pari materia of S. 25 of the Sales Tax Act, 1990-Both said sections empowered the Commissioner for selecting and conducting the audit or reassessing the assessment filed by the tax payer-Comfnissioner had the authority to conduct audit of the tax affairs including examination of accounts and records and enquiry into expenditures, assets and liabilities of the taxpayer.

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

25---Income Tax Ordinance (XLIX of 2001), S. 177---Self­assessment Scheme---Object and scope---Self-assessment Scheme was a facility provided to the taxpayer to save him from the agony of scrutiny, wastage of time in offices and avoidance of corrupt practices of tax authorities, if any---At the same time, the taxpayer was required to show source of his income, his expenditure and the tax assessed honestly without concealment of anything---Self-assessment submitted by the taxpayer had to be verified, because of which the Commissioner Inland Revenue had been given the powers to call for record or documents of any person.

(e) Interpretation of statutes---

----Provision (in a statute) should not be extended by implication beyond the clear import of the language used neither its operation should be enlarged so as to embrace matters not specifically pointed out.

Humayun Nawaz Khan for Petitioner.

Babar Ali Khan for Respondents.

2015 P T D 1757

[High Court (AJ&K)]

Before Azhar Saleem Babar, J

HABIB BANK LIMITED through Attorneys

versus

AZAD GOVERNMENT OF THE STATE OF JAMMU AND KASHMIR through

Chief Secretary and 8 others

Writ Petition No.871 of 2012, decided on 28th May, 2015.

(a) Azad Jammu and Kashmir Local Government Act, 1990---

----S. 65---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974), S.44---Writ petition---Tax imposition of---Scope---Publicity and advertisement fee---Displaying of name of Bank outside of a branch---Collection of publicity/advertisement fee from the Bank---Laches, doctrine of---Applicability---Municipal Corporation issued demand notices for payment of publicity/advertisement fee from the petitioner-bank for sign boards which were erected at various branches by hiring the services of a contractor---Validity---Impugned notices did not indicate that some tax had been levied on the Bank rather certain amounts had been demanded as "tax" and "fee" by the officials---Officials could be empowered to levy tax for cleaning and providing bins as keeping the streets clean for 'public purpose'---Municipal Corporations had already levied taxes under the head "public purpose"---Authority established under law could not be restrained from levying tax/fee even if business had been established under some specific provisions of law---Displaying of name of Bank outside a branch did not fall within the definition of 'advertisement'---Authorities had demanded different amounts as publicity fee which the officials were not empowered under the law to impose---Tax/fee could not be imposed without its publication in the official gazette---Taxes, rates, tolls and fees had to be notified in the prescribed manner---Officials could not satisfy that imposition of taxes/fees had properly been notified---Impugned demand notices of advertisement fee were bad in law---Fees were being demanded continuously under the impugned notification which would create a continuous cause of action in favour of Bank---Principle of laches did not attract in the present case---Impugned notices demanding "publicity fee" from the Bank were set aside and officials were restrained from levying or demanding any tax/fee for displaying name of the Bank outside the building of a branch---Writ petition was accepted in circumstances.

2008 YLR 1888; 1991 CLC 354; PLD 1998 Pesh. 26; PLD 1998 SC (AJK) 17; 2007 CLC 35; PLD 2013 SC 413; PLD 1993 SC AJ&K 12; 2008 SCR 619 and 2012 SCMR 1004 ref.

1999 PLC (CS) 1173 and 2011 MLD 1987 rel.

(b) Words and phrases---

----"Tax"---Meaning---Tax was an obligation imposed by an Authority for "public purpose".

(c) Words and phrases---

----"Fee"---Meaning---Fee was a payment of obligation imposed on the rule of "quid pro quo" which would postulate that the Authority had to render some service in lieu of fee.

(d) Taxation---

----Tax/fee could not be imposed without publication of the notification in the official gazette.

Barrister Hamayun Nawaz Khan for Petitioner.

Sardar Abdul Sammie Khan, Jahandad Khan Mughal and Syed Amjad Ali Shah for non-Petitioner.

2015 P T D (Trib.) 408

[Income Tax Appellate Tribunal]

Before Munsif Khan Minhas Judicial Member and Istataat Ali, Accountant Member

Messrs AYESHA LASANI MODEL SCHOOL, RAWALPINDI

Versus

C.I.T., RAWALPINDI

I.T.A. No.19/IB and MA(AG) No.38A/IB of 2009, decided on 18th July, 2009.

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

----Ss. 39, 111(2), 120 & 122(5)---Amendment of assessment---Un-explained income---Addition of un-explained income in income chargeable to tax---Un-explained income, had to be included in the income of assessee chargeable to tax in the tax year immediately preceding financial year in which it was discovered---Assessing Officer, in the present case, did not make the addition in immediately preceding year; but made the addition in the year of accretion in assets---Action of the Assessing Officer being totally against the law contained in S.111(2) of Income Tax Ordinance, 2001, was not maintainable, and was deleted.

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

----S. 120---Assessment order passed on holiday---Maintainability---Assessment order, passed on a closed holiday, was not lawful order and being not maintainable, was annulled.

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

----Ss. 111 & 116---Un-explained income---Chargeable to tax---Revision of wealth statement---Scope---Assessing Officer made addition in the income of assessee under S.111 of Income Tax Ordinance, 2001 which was challenged---Assessee was in possession of documentary evidence to establish that assets in question were acquired by him through bank loans---Said loans were supported by certificate from the concerned banks---Other documentary evidence about sources of acquisition of assets, was also produced by assessee; but Assessing Officer rejected plea of assessee on simple ground that in his opinion revision of wealth statement could not be allowed---Validity---Addition under S.111, could only be made, if assessee did not possess sufficient evidence to justify and explain the source of acquisition of assets---Whether or not the assets were disclosed in the wealth statement was not material---Assessee, who brought on record sufficient documentary evidence to explain his wealth statement, was legally entitled to revise his wealth statement for reflection of correct picture---Assessing Officer, in circumstances, was not justified to reject the revised wealth statement---Orders of Authorities were vacated and impugned addition was deleted.

2006 PTD 2662 (Trib.); 2008 PTD (Trib.) 1007; Mohsin Raza v. Chairman FBR, and others 2005 PTD 152; 2005 PTD 1974; 2009 SCMR 339; 2009 PTD 377 (Trib.); 2008 PTD (Trib.) 1007 and 99 Tax 350 (Trib.) (sic) ref.

Rizwan Yaqoob and Atif Wahed for Appellants.

Sardar Taj Muhammad Khan DR for Respondent.

Date of hearing: 18th July, 2009.

2015 P T D (Trib.) 624

[Income Tax Appellate Tribunal]

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

Messrs AL-KAUSAR HOTEL, DINA

versus

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

M.A.(R) Nos.174/IB and 175/IB of 2008, decided on 13th December, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 & 131---Amendment of assessment---Remand of case by Appellate Tribunal---Application for recall of remand orders---Taxpayer had sought recall of orders of Tribunal on the grounds that Tribunal had remanded the case to the Taxation Officer without giving any findings on the objections raised by authorized representative of the taxpayer with regard to legal lacunae in the assessment order---Objections which remained un-adjudicated were that the assessment order was passed without mentioning any specific provisions of S.122 of Income Tax Ordinance, 2001; that case-law relied upon in support of acceptance of receipts being subject to sales tax had not been considered, and that no finding had been given with regard to contention that the sales had been estimated without pointing out any defects in the books of accounts---Taxpayer's contention regarding non-consideration of the objections raised in the original appeal were tenable---Tribunal was bound to give findings regarding the issues raised in appeal---Case should not be remanded as a matter of routine so as to allow the Taxation Officer to fill in legal lacunae or to improve its case---Impugned order was recalled, and appeals were restored to their original numbers for fixation as per roster, in circumstances.

1971 SCMR 681; 2005 PTD 2417 and 2003 PTD 1956 ref.

Atif Waheed for Petitioner.

Altaf Ahmad Khan for Respondent.

Date of hearing: 4th December, 2008.

2015 P T D (Trib.) 9

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Jawaid Masood Tahir Bhatti, Judicial Members and Amjad Ikram Ali, Accountant Member

KOHAT CEMENT COMPANY LTD., LAHORE

Versus

COMMISSIONER OF INCOME TAX (LEGAL) LTU, LAHORE

I.T.As. Nos.371/LB and 300/LB of 2008, decided on 6th November, 2009.

Per Jawaid Masood Tahir Bhatti, Judicial Member and Ch. Anwaar ul Haq, Judicial Member, agreeing.

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

----Ss.21 & 32---Deductions not allowed---Method of accounting---Obsolete store and spares, written off---Addition of said items for the reason that the taxpayer failed to substantiate the stance due to the reason that the same were not actually disposed of and no loss was determinable at present point of time; and claim was to be viewed when the actual disposal would take place---Validity---Propriety of the expenditure had not been challenged by the Taxation Officer but he required the taxpayer to claim the expenditure on the actual disposal of the stores and spares---Taxpayer claimed that the deduction of expenditure in the tax year 2003 had been claimed on accrual basis of accounting regularly employed by the taxpayer---Evidence had been produced that the actual disposal of the obsolete stores and spares had been subsequently taken place and the receipts in this respect had also been recognized as income, which showed the fair conduct of the taxpayer in that respect---Addition deleted by the First Appellate Authority was not interfered by the Appellate Tribunal and appeals of the department were dismissed.

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

----Ss.39 & 18---Income from other sources---Income from business---Profit/mark-up on bank deposits was treated as income from other sources---Taxpayer contended that excess liquidity available with the taxpayer company was as a matter of prudence could be an interest appearing in a bank account and was the business income under S.18 of the Income Tax Ordinance, 2001; as the taxpayer in the present case had deposited in the bank the surplus cash generated from normal business activities of the taxpayer and the interest income was not from cash deposit which was the capital of the company---Validity---Interest/ profit/mark-up on bank deposits was income from other sources chargeable under S.39 of the Income Tax Ordinance, 2001---Order of First Appellate Authority was upheld and the appeal filed by the assessee was dismissed by the Appellate Tribunal.

Genertech Pakistan Ltd. and others v. ITAT and others (2004) 90 Tax 33 and 2007 PTD (Trib.) 2365 rel.

1993 PTD (Trib.) 465 ref.

Per Amjad Ikram Ali, Accountant Member [Minority View] [p. 15] E

Per Ch. Anwaar ul Haq, Judicial Member agreeing with Javaid Masood Tahir Bhatti, Judicial Member

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

----Ss.35(4), 32, 70, 177 & 122(1)/(5)---Stock in trade---Obsolete store and spares, written off---Addition of said items for the reason that the taxpayer failed to substantiate the obsolescence due to the reason that the same were not actually disposed of---Validity---Stores/spares constituted taxpayer's "stock-in-trade" under the law, being in the nature of consumables for production/manufacturing process---Provisions of subsection (4) of S.35 of the Income Tax Ordinance, 2001 compulsorily required a taxpayer to record/recognize the "stock-in-trade", available at the close of a tax year, at the lower of cost or net realizable value---If the net realizable value fell short of cost of acquisition of stock-in-trade, the law required that the same was recorded at net realizable value---Such legal position raised a question that in such a case where would the difference between the cost and the net realizable value be classified/recognized by a taxpayer---Of-course the difference was a loss to a taxpayer and had to be recognized in the financial statements; it was under these provisions of law that a taxpayer was mandated/authorized to recognize in relevant cases, as expenditure, the difference between the cost and net realizable value, which was usually denoted as "obsolete stores written off" or "provision for obsolete stores"---Said two nomenclatures, in other words, generally denote the recognition, as loss/expense, the difference between the cost and net realizable value, which the law clearly, unambiguously and unequivocally permits---Disposal was absolutely irrelevant and out of context because the provisions of law speak of closing stock-in-trade---Provision was in fact applicable to still 'available' and 'unsold' stock and the disposal had been illegally and incorrectly dragged by the Taxation Officer, in other words, it was in respect of unsold/un-disposed stock, whose net realizable value fell short of cost, that the law had provided for a deduction against income which the taxpayer had rightfully and lawfully claimed---Basis adopted by the Taxation Officer to deny the deduction to the taxpayer remained clearly contrary to law and was disapproved---Provisions of S.70 of the Income Tax Ordinance, 2001 in such a background attained relevance---Law by virtue of these provisions ensured appropriate recoupment of expenditure as a result of sale subsequently---Said provisions make sure that any subsequent recovery by taxpayer with regard to a loss, expenditure, or deduction earlier allowed had to be included as part of income in the year in which recovery /realization occurs---Under the provisions of S.35 of the Income Tax Ordinance, 2001, this was a legitimate expenditure in connection with which any subsequent recovery had to be dealt with under S.70 of the Income Tax Ordinance, 2001, which the taxpayer admittedly had duly complied with---Claim of expenditure on account of obsolete stores written off was held to be lawfully claimed by the taxpayer---Order of First Appellate Authority was upheld and the departmental appeal on this point was dismissed being bereft of merit.

Viqar A. Khan, FCA for Appellant (in I.T.A. No.371/LB of 2008).

Zulqarnain Trimzi, D.R. for Respondent (in I.T.A. No.371/LB of 2008).

Zulqarnain Trimzi, D.R. for Appellant (in I.T.A. No.300/LB of 2008).

Viqar A. Khan, FCA for Respondent (in I.T.A. No.300/LB of 2008).

Date of hearing: 5th November, 2009.

2015 P T D (Trib.) 63

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Javed Iqbal, Ch. Shahid Iqbal Dhillon, Muhammad Waseem Ch., Judicial Members, Sohail Afzal, Muhammad Akram Tahir and Fiza Muzaffar, Accountant Members

FAUJI KABIRWALA POWER COMPANY LTD. and 8 others

Versus

COMMISSIONER INLAND REVENUE, ZONE-III, LTU, ISLAMABAD

S.T.As. Nos. 605/LB, to 608/LB and 979/LB to 982/LB of 2013, decided on 13th December, 2013.

Per Ch. Anwaar-ul-Haq Judicial Member; Sohail Afzal, Accountant Member, Muhammad Akram Tahir, Accountant Member, Fiza Muzaffar, Accountant Member, Ch. Shahid Iqbal Dhillon, Judicial Member, agreeing; Javed Iqbal, Judicial Member contra

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

----Ss.8(2), 7, 2(46), 11(2), 33, 34 & 71---Sales Tax Special Procedures Rules, 2007, Chap: III, Rr.13(3) & 15(1)---Sales Tax Rules, 2006, Chap: IV, R.25---S.R.O. 922(I)/99 dated 16-8-1999---Tax credit not allowed---Power project---Energy purchase price---Capacity purchase price---Taxable supplies---Non-taxable supplies---Exempt supplies---Apportionment of input tax---Disallowance part of input tax---Revenue confronted that Independent Power Producers failed to make apportionment of input tax in respect of amount received against Capacity Purchase Price from Water and Power Development Authority; and Capacity Purchase Price was exempted from levy of sales tax in terms of Sales Tax Special Procedures Rules, 2007 subject to provisions of Ss.7, 8 of Sales Tax Act, 1990 and all other relevant provisions of the Sales Tax Act, 1990, Rules and notifications; and if a registered person dealt in taxable supplies and non-taxable/exempt supplies, it could reclaim only such proportionate of input tax as was attributable to tax supplies in such manner as may be specified in terms of S.7 read with S.8 of the Sales Tax Act, 1990 and concluded that while Energy Purchase Price constituted consideration for 'taxable supply', the consideration for Capacity Purchase Price constituted 'non-taxable supply' which distinction permit it to restrict/disallow part of input tax; and mechanism for computation of 'value of supply' had an effect of splitting the supply/consideration into 'taxable and 'non-taxable' supplies which lawfully warranted apportionment of input tax under S.8(2) of the Sales Tax Act, 1990 read with Chapter IV of the Sales Tax Rules, 2006---Taxpayer contended that Capacity Purchase Price was excluded from value of supply under R.13(3) of the Sales Tax Special Procedures Rules, 2007; that as Capacity Purchase Price was not a part of value of supply; the Revenue could not make apportionment of input tax as Independent Power Producers were involved only and exclusively in one taxable activity i.e. production and sale of electricity; that consideration on account of Capacity Purchase Price was one of the segments of tariff/sale consideration of electricity; that Capacity Purchase Price was not a consideration for any identifiable supply rather the same was one of the components of consideration for taxable supply which was electricity; that provisions did not categorize the revenue representing Capacity Purchase Price as a consideration for 'non-taxable supply' rather these EXCLUDED the same from the amount chargeable to sales tax; that such exclusion had been wrongly and unlawfully equated by the Revenue with non-taxable/exempted supply; that where consideration in respect of one taxable supply was split into categories in a manner that part of the amount required to be subjected to sales tax and part to be excluded from charge of sales tax remain outside the purview of apportionment; that there was only one supply i.e. supply of electricity, the consideration for which was split in the Power Purchase Agreements under different heads ; that provisions of R.13(3) of the Sales Tax Special Procedures Rules, 2007 had made exclusion while prescribing the charge of tax and restricted the same to the extent of Energy Purchase Price; that such could not be construed or equated with the situation conceived by the lawmaker to be the subject matter of S.8(2) of the Sales Tax Act, 1990 read with Chapter IV of Sales Tax Rules, 2006; that in terms of provisions contained in S.8(2) of the Sales Tax Act, 1990 'apportionment' was required where a registered person dealt in 'taxable supplies' and 'non-taxable supplies', and such apportionment could only be carried out in 'such' manner as may be specified by the Federal Board of Revenue in the Rules; that Federal Board of Revenue had prescribed Chapter IV in Sales Tax Rules, 2006 in which 'apportionment' was specified between 'taxable supplies' and 'exempt supplies' exclusively; and that in said rules, the expression used was 'exempt supplies' and not 'non-taxable supplies', an expression used in primary legislation i.e. S.8(2) of the Sales Tax Act, 1990---Validity---Taxpayer dealt in taxable and non-taxable/exempt supplies and could reclaim only such proportion of input tax as was attributable to taxable supplies in such manner as may be specified by the Federal Board of Revenue---Having established that consideration paid by Water and Power Development Authority to Independent Power Producers (tariff) was taxable and that one component of the said tariff i.e. Capacity Purchase Price was exempted, input tax claimed shall be apportioned according to the manner specified by the Federal Board of Revenue---Federal Board of Revenue in R.25 of Sales Tax Rules, 2006 had formulated the methodology for apportionment of input tax for Registered Person making taxable and exempt supplies simultaneously---In the present case there being only one supply i.e. Bulk Power and as a component of said bulk power i.e. Capacity Purchase Price was exempted under Sales Tax Special Procedures Rules, 2007; and only residual input tax credit on taxable supplies could be claimed by the taxpayer meaning thereby that the taxpayer could not claim input adjustment without fulfilling the criteria laid down in Ss. 7 & 8 of the Sales Tax Act, 1990---Revenue had rightly applied R. 25 of the Sales Tax Rules, 2006 for apportioned input tax claimed by the Independent Power Producers---Show-cause notice issued under S.11(2) along with default surcharge under S.34 and penalty under S.33 of the Sales Tax Act, 1990, order in original as well as impugned order-in-appeal was upheld and appeals of the taxpayer/registered persons were rejected by the Appellate Tribunal.

Messrs Fauji Kabirwala Power Company Limited's case 2011 PTD 1306; (2013) 107 Tax 318 (Trib.); PLD 1975 Lah. 65; PLD 1980 Kar. 492; 2007 PTD 1902 = PLD 2007 SC 517; 2008 PTD 1693; 2002 PTD 2845; 2001 PTD 2982; 2002 PTD 976; 2001 PTD 2097 = 2001 SCMR 1376; Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431; Messrs Nishat Dairy (Pvt.) Ltd. v. Commissioner Inland Revenue 2013 PTD 1883; Al-Karam CNG and others v. Federation of Pakistan and others 2011 PTD 1; Baba Farid Sugar Mills Ltd. v. Federation of Pakistan and others Writ Petition No.12851 of 2012 and The Collector of Sales Tax and others v. Superior Textile Mills Ltd. and others 2001 PTD 1486 ref.

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

----S.3(1)(a)---Scope of tax---Expression "In the course of"---Phrase "In furtherance of"---Meanings---"In the course of" means connected with, related to or having some nexus with the business/taxable activity and similarly "in furtherance of" was indicative of the fact that the taxable supply had been made for the enhancement/further development of the business/taxable activity.

2001 SCMR 1376; 2008 PTD 103; 2007 PTD 1902 = PLD 2007 SC 517; 2008 PTD 1693; 2002 PTD 2845; 2001 PTD 2982; 2002 PTD 976 and 2001 PTD 2097 = 2001 SCMR 1376 rel.

2007 PTD 1902 = PLD 2007 SC 517 ref.

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

----S.3(1)---Scope of tax---Independent Power Producers---Consideration paid by Water and Power Development Authority for purchase of power in accordance with Schedule 1 (Tariff, Indexation and Adjustment) of the Power Purchase Agreement to the Independent Power Producers while ensuring 18% profitability also furthered the business of the Independent Power Producers and shall be taxable in terms of S.3(1) of the Sales Tax Act, 1990.

2001 SCMR 1376; 2008 PTD 103; 2007 PTD 1902 = PLD 2007 SC 517; 2008 PTD 1693; 2002 PTD 2845; 2001 PTD 2982; 2002 PTD 976 and 2001 PTD 2097 = 2001 SCMR 1376 rel.

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

----S.2(46)---Expression "Value of supply"---Meaning---Interpretation of word "means"---Term 'means' restricts the scope of the term value of supply and no other meaning could be given to value of supply in contravention of S.2(46) of the Sales Tax Act, 1990.

Messrs Fauji Kabirwala Power Company Ltd.'s case 2011 PTD 1306; Haji Sultan Ahmed v. CBR and 5 others 2008 PTD 103 and Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431 rel.

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

----S.2(46)(g), proviso---Independent Power Procedures---"Value of supply"---Retail price---Meanings---Proviso to Cl. (g) of Cl.(46) of S.2 of the Sales Tax Act, 1990 was only to the extent of retail tax---Taxpayers/Independent Power Producers were not retailers and no other meaning other than what had been laid down in Cl. (46) of S.2 of the Sales Tax Act, 1990 could be given to "value of supply".

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

----Ss.3 & 13(2)---Sales Tax Special Procedures Rules, 2007, R.13(2b) & (3)---Scope of tax---Exemption---Independent Power Producers---"Capacity Purchase Price"---If S.13(2) of the Sales Tax Act, 1990 was read with R.13(2b) & (3) of the Sales Tax Special Procedures Rules, 2007, the only interpretation that follows was that Capacity Purchase Price was exempted from levy of Sales Tax, otherwise, being taxable in terms of S.3 of the Sales Tax Act, 1990---Power of levy of charge as contained in S.3 of the Sales Tax Act, 1990 could not be restricted by the Rules of Procedure; however, levy of charge under S.3 of the Sales Tax Act, 1990 could be exempted by the competent authorities.

Messrs Fauji Kabirwala Power Company Ltd.'s case 2011 PTD 1306; PLD 1980 (Kar.) 492; Haji Sultan Ahmed v. CBR and 5 others 2008 PTD 103; 2001 PTD 2982 and Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431 rel.

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

----S.13---Sales Tax Special Procedures Rules, 2007, R.13(3)---"Exemption"---"Exclusion"---Destination---Primary difference between "exclusion" and "exemption" was that exclusion reduces the value of taxable supply, while exemption reduces the amount of tax---Exclusion reduces the value of supply, exemption first reduces the quantum of tax and as a consequence reduces the payability of tax due, both leading to the same result of reducing the tax liability/payability of the Registered Person---Mathematically speaking exclusion of certain items from the value of supply and exemption work on opposite sides of the one and the same equation---At the end of day, both the incentives/ methodologies "reduce" and "exempt" the tax liability of the Registered Person which may be in varying degree, under the provisions of Sales Tax Act, 1990.

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

----S.13(2)(a)---Independent Power Procedures---Exemption---Power of Federal Government---Section 13(2)(a) of the Sales Tax Act, 1990 empowered the Federal Government, through notification in the official gazette, to extend exemption to any taxable supplies from 'whole' or any 'part' of the tax chargeable under the Sales Tax Act, 1990---While framing Sales Tax Special Procedures Rules, 2007, the Federal Government while exercising said powers as provided under S.13(2)(a) of the Sales Tax Act, 1990 excluded the value of Capacity Purchase Price, Energy Purchase Price, Excess Bonus, Supplemental Charges, etc., from the value of electricity supply and restricted the same to the extent the value of Energy Purchase Price only, as provided in R.13(3) of the Sales Tax Special Procedures Rules, 2007---Such exclusion constitutes "exemption" from the "value" of gross price of electricity.

Messrs Nishat Dairy (Pvt.) Ltd. v. Commissioner Inland Revenue 2013 PTD 1883 and Al-Karam CNG and others v. Federation of Pakistan and others 2011 PTD 1 rel.

Baba Farid Sugar Mills Ltd. v. Federation of Pakistan and others Writ Petition No.12851 of 2012 distinguished.

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

----Ss.71(1), 13(2)(a) & 2(46)---Special procedure---While framing subordinate legislation i.e. Sales Tax Special Procedures Rules, 2007, Federal Government could not curtail the scope of definition of the "value of supply" as provided in S.2(46) of the Sales Tax Act, 1990---Federal Government was fully empowered under S.13(2)(a) of the Sales Tax Act, 1990 to exempt "whole or any part of tax chargeable", which includes the "value of supply".

Per Javed Iqbal Judicial Member [Minority view] [pp. 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 105, 106] R, S, T, U, V, W, X, Y, Z, AA, BB, CC, DD, EE, FF

1993 PTD 69; 1996 SCMR 1470; 2008 PTD 103; 2013 PTD 1420; 2010 PTD 808; 2009 PTD 722; 2008 PTD 838; 2002 PTD 877; 2002 PTD 1573; 1992 SCMR 663; 1992 SCMR 2192; 1999 YLR 710; 2008 PTD 838; 2011 PTD 2042 = 2001 CLD 1300; 2003 PTD 1321; 2008 PTD 1346; 2006 PTD 1902; 2009 PTD 1661; 1989 CLC 1369; 2005 YLR 1293; 2003 PTD 1392; 1988 PTD 535; 2012 PTD (Trib.) 263; 2008 PTD 1993; 2010 PTD (Trib.) 1643; 2003 PTD 1276; 2011 PTD 1306; (2013) 107 Tax 318 (Trib.); PLD 1975 Lah. 65 and PLD 1980 Kar. 492 ref.

Messrs Fauji Kabirwala Power Company Ltd.'s 2011 PTD 1306; PLD 1975 Lah. 65; PLD 1980 Kar. 492; 2001 PTD 2982; Messrs Gujranwala Steel v. Chairman FBR and others 2009 PTD 431; Messrs Nishat Dairy (Pvt.) Ltd. v. Commissioner Inland Revenue 2013 PTD 1883; Al-Karam CNG and others v. Federation of Pakistan and others 2011 PTD 1 and The Collector of Sales Tax and others v. Superior Textile Mils Ltd. and others 2001 PTD 1486 distinguished.

Asim Zulfiqar Ali, FCA, Rashid Ibrahim, FCA, Hafiz Muhammad Idrees and Umar Arsha for Appellants.

Sikandar Naeem Qazi, LA, Ch. Muhammad Zafar Iqbal, LA and Dr. Ishtiaq Ahmad, D.R. for Respondent.

Date of hearing: 6th December, 2013.

2015 P T D (Trib.) 125

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Anwar Goraya, Accountant Member

MUSADDAQ FARHAN CHUGHTAI

Versus

COMMISSIONER OF INLAND REVENUE, R.T.O., SIALKOT

I.T.A. No.794/LB of 2012, decided on 10th October, 2013.

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

----Ss.111, 120(1A), 177 & 122(5A)---Federal Board of Revenue Circular No.10 of 2010 dated 16-7-2010---Unexplained income or assets---Proceeds from sale of property---Addition of---Revenue contended that sale value of property was overstated by the taxpayer and Show-Cause Notice was issued to explain the queries raised for sale of property, but the taxpayer had failed to satisfy with the help of concrete evidence that the property was sold for the claimed consideration---Taxpayer contended that sale consideration received had been accepted by the department while making assessment in the hands of the buyer; and investment to the extent of such amount generated through sale of property was liable to be accepted---Validity---Assertions made by the taxpayer regarding investment made in the purchase of seven properties out of the funds generated through sale of property were quite plausible which was duly supported by the documentary evidence placed before the Appellate Tribunal---Department had already accepted such figure of investment from sale of property in the hands of purchasers whereas in the taxpayer's case (seller) department had rejected the same on the ground that the taxpayer inflated the figure---Department could not be allowed to blow hot and cold in the same breath---Act of the department seemed to be a double standard having no sanctity in the eye of law---Appellate Tribunal directed that investment made by the taxpayer in the purchase of properties to the extent of sale proceeds from sale of property be treated as made from explainable sources and addition made to that extent was deleted.

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

----Ss.111(4), 120(1A), 177 & 122(5A)---Unexplained income or assets---Condition for acceptance of foreign exchange remittance---Subsection (4) of S.111 of the Income Tax Ordinance, 2001 revealed that when amount of foreign exchange remitted from outside Pakistan shall not be added as unexplained income under subsection (1) of S.111 of the Income Tax Ordinance, 2001, the taxpayer fulfil the conditions (a) the amount had been received through normal banking channel in Pakistan (b) encashed into Pak rupees through a scheduled bank, and (c) certificate from such bank was produced to that effect.

(c) Foreign Exchange Manual, 2002 (State Bank of Pakistan)---

----Chap. VI---Foreign Currency Accounts---Under Private Foreign Currency Accounts Rules framed by the State Bank of Pakistan, any Pakistani national residing in or outside Pakistan, including those having dual nationality may operate bank account in foreign currency in any schedule bank and the said foreign currency account could be fed by remittances received from abroad travellers' cheques issued outside Pakistan, foreign currency notes and foreign exchange generated by encashment of securities issued by the Government of Pakistan---Said accounts were free from all foreign exchange restrictions; in other words, account holders had full freedom to operate on their accounts to the extent of the balance available in the accounts either for local payment in rupees or for remittance to any country and for any purpose or for withdrawal in the shape of foreign currency notes and travellers' cheques.

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

----Ss.111(4), 120(1A), 177 & 122(5A)---Unexplained income or assets---Foreign exchange remittance---Non-encashment of such remittance through bank into Pak rupees---Addition of---Validity---Taxpayer admittedly had received US dollars through normal banking channel and said transaction had been confirmed by the bank---Taxpayer had complied with only one condition but there was no proof that the said amount was en-cashed by the bank into Pak rupees and further no certificate in this regard had been produced despite several opportunities were provided by the Appellate Tribunal---Taxpayer failed to produce such certificate from the bank showing date of encashment, exchange rate, amount encashed and certificate to the effect that encashment of Foreign Currency had been reported to the State Bank of Pakistan---Rationale behind the insertion of subsection (4) in S.111 of the Income Tax Ordinance, 2001 was to generate foreign remittances by the State to pay off foreign debts and to take benefit of such concession; it was national obligation of the taxpayer to surrender the foreign remittances (US $) before any scheduled bank and receive encashment into Pak rupees but instead of doing so taxpayer opted to sell the US $ in the open market to earn profit---Since taxpayer failed to en-cash the remittances as per prescribed law, he could not be entitled to get benefit of the same---Provisions of S.111(4) of the Income Tax Ordinance, 2001 was just like an exemption clause which provided that if the taxpayer comply with the conditions, then the taxpayer would be entitled to get benefit of the said provisions---Exemption provisions were to be construed strictly and that it was always for the assessee/taxpayer to establish that his case clearly fell within the exemption clause---Taxpayer had not strictly adhered to the provisions of S.111(4) of the Income Tax Ordinance, 2001---Assessing officer had rightly rejected the taxpayer's claim of exemption and addition made under S.111(1)(b) of the Income Tax Ordinance, 2001 to the extent of such amount was confirmed by the Appellate Tribunal---Order of First Appellate Authority was accordingly modified by the Appellate Tribunal.

Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan 1992 SCMR 1652 ref.

Muhammad Akram Raza, ITP for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 9th September, 2013.

2015 P T D (Trib.) 138

[Inland Revenue Appellate Tribunal]

Before Nazar Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

I.T.As. Nos.1942, 1943/LB of 2012, I.T.A. No.120/LB of 2013 and I.T.A. No.1812/LB of 2011, decided on 13th January, 2014.

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

----Ss.113(3), 221, 5 & 2(63)---Income Tax Ordinance (XXXI of 1979), S.80D---Minimum tax on the income of certain persons---Minimum tax---Final tax---Imposition concurrently---Validity---No controversy existed in the present case with regard to application and scope of S.113 of the Income Tax Ordinance, 2001 for the period up to 30-6-2008 i.e. the date when S.113 of the Income Tax Ordinance, 2001 was omitted vide Finance Act, 2008---Prior to insertion of "explanation", mere enlargement or elaboration of definition of expression 'turnover' in subsection (3) of S.113 of the Income Tax Ordinance, 2001 did not alter the situation earlier applicable as interpreted by the Courts---After re-enactment and prior to insertion of "explanation", the provisions of law clearly warranted imposition of higher of minimum tax or final taxes as was offered for tax by the taxpayer in its declarations---At the time, when Assessing Officer imposed final tax and minimum tax concurrently, same was clearly not lawful---Since, through insertion of 'explanation', a new restrictive definition of 'tax paid or payable' had been provided by the legislature which had altered and clearly enlarged the scope of substantive part of S.113 of the Income Tax Ordinance, 2001 and that the legislature had not expressly made it retrospective, said "explanation" could not be considered to be applicable on retrospective basis---Orders of the authorities below were vacated and it was held by the Appellate Tribunal that minimum tax and final taxes could not be concurrently imposed---Assessing authority clearly erred in imposing final tax and minimum tax concurrently---Only the higher of two amounts was payable under the law.

2009 PTD 1707; 2011 PTD (Trib.) 168; 2011 PTD (Trib.) 845 and M.A. No.79/LB 2012 ref.

2004 PTD 921; 2001 PTD (Trib.) 755 and 2011 PTD 1558 rel.

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

----Ss. 5, 8, 169(3) & 122(5A)---Tax on dividends---Tax collected or deducted as a final tax---Imposition of tax on dividend in addition to minimum tax---Taxpayer contended that consequent to amendments made in S.8 and S.169(3) of the Income Tax Ordinance, 2001 vide Finance Act, 2007, dividend income for corporate recipients was brought out of 'final tax regime'; and it remained so until amendments introduced vide Finance Act, 2013 when position was reinstated as was applicable prior to Finance Act, 2007; and tax on dividend was not a final tax for tax years 2008 through 2013 and was a tax liability under normal tax regime for which a reduced rate of tax of 10% was prescribed; and once it was held that dividend could not be set off and remained chargeable to tax in the year in which the income was derived, the tax could not be imposed in addition to minimum tax rather the applicability and imposition of minimum tax remained dependent upon quantum of tax on dividend; and under the law either tax could have been imposed on dividend or alternatively minimum tax could have been imposed if the tax on dividend remained less than specified proportion of sales subject to tax under normal tax regime---Validity---Assessing authority had erred in law by imposing dividend tax in addition to taxes imposed in rectification orders---During the period 1-7-2007 to 30-6-2013, dividend income remained outside the purview of final tax regime---For the purposes of determining the applicability of minimum tax, it had to be seen whether final taxes and tax on dividend income remained less than minimum tax i.e. proportion of local sales---In case, these two taxes exceeded the minimum tax, the provisions of S.113 of the Income Tax Ordinance, 2001 became inapplicable ab initio---After refusal of set off of dividend income against business losses by the assessing authority and subjection of the same to charge of tax, the position changed altogether as taxpayer had not admitted such liability in its declarations---Tax on dividend income together with final taxes far exceeded the amount of minimum tax and the taxpayer did not remain liable to levy of minimum tax rather it remained liable to tax on dividends as well as final taxes, these being the taxes otherwise payable under the Income Tax Ordinance, 2001---Orders of authorities below were modified and it was held by the Appellate Tribunal that taxpayer remained liable to final taxes and dividend tax as aggregate thereof was in excess of minimum tax---No amount was payable by the taxpayer under S.113 of the Income Tax Ordinance, 2001.

Asim Zulfiqar Ali, FCA for Appellant.

Muhammad Tahir, D.R. for Respondent.

Date of hearing: 13th January, 2014.

2015 P T D (Trib.) 218

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Muhammad Majid Qureshi, Accountant Member

QASIM BUTT

Versus

The C.I.R., R.T.O., SARGODHA

I.T.A. No.213-IB of 2012, decided on 25th October, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b)(c), 122(1), 122(5), 114 & 116---Unexplained income or assets---Investment for purchase of vehicles---Addition---Taxpayer contended that a vehicle was purchased at Rs.26,50,000 on 6-1-2009 which was sold out at Rs.26,75,000 on 20-12-2009 and in pursuance the taxpayer purchased another vehicle at Rs.23,60,000 on 12-2-2010 and said vehicle was sold out at Rs.23,60,000 on 6-3-2010; and then another vehicle was purchased at Rs.8,50,000 on 30-4-2010 and same was sold out at Rs.8,70,000 on 30-9-2011; and that all these investments were made from sale of motor vehicles, copies of sales deeds along with other documents were submitted before the taxation officer but Taxation Officer wrongly and illegally made the additions at Rs.59,50,000 which was unjustified and contrary to the facts of the case---Validity---Stance of the taxpayer was not convincing and not forceful because the taxpayer was involved in sale and purchase of commercial as well as other motor vehicles but never filed return of income before issuance of notices under Ss.114 & 116 of the Income Tax Ordinance, 2001 for the tax year 2010 and no wealth statement had ever been filed---Availability of cash amounting to Rs.12,205,000 was not established---Upholding the assessment finalized under S.122(1)/122(5) and additions made under Ss.111(1)(b) & 111(1)(c) of the Income Tax Ordinance, 2001 by the First Appellate Authority was maintained.

Muhammad Iqbal Malik for Appellant.

Muhammad Jawaid, D.R. for Respondent.

Date of hearing: 13th September, 2013.

2015 P T D (Trib.) 269

[Inland Revenue Appellate Tribunal]

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

Messrs CITRO PAK LTD. Lahore

Versus

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

I.T.As. Nos. 1924/LB and 1908/LB of 2013, decided on 18th March, 2014.

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

----Ss.67, 122(5A) & 122(9)---Income Tax Rules 2002, Rr.13 & 231---CBR Circular No.5 of 2000 dated 6-3-2000---Deductions, apportionment of---Computation of export profits and tax attributable to export sales---Assessment was amended on the ground that local income had been declared by wrong proration of expense and income was worked out as per S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002---Taxpayer contended that as per R.231 of the Income Tax Rules, 2002, export related expenses were net off from export after Gross Profit; that FOB price based export sales should be adopted as a basis for allocation of common expenses; that FOB price meant, total export sales less freight paid; that for computation of export profit and tax attributable to export sales, FOB, value of export should be considered for allocation of G.P and proration of expenses; and under the same rule, local sale should be taken as ex-factory price; that term "ex-factory price" included sales tax inclusive value thereof all; that common expenses will be deducted on the basis of sale value including sales tax; that legislature placed a specific definition of turnover in case of manufacturer-cum-exporter,; that turnover in the case of manufacturer-cum-exporter will be taken as FOB value in the case of Exports whereas local supplies will be taken as Ex-Factory Price as well as Ocean freight was rightly deducted from export sales to arrive at FOB value whereas Sales Tax inclusive value will be treated as Ex-Factory Price to arrive at Ex-Factory sales; that sales tax will be deducted as directly attributable expense; and that demand raised on this account should be deleted---Validity---Where clear definition of "Export Sales" and "Local Supplies" was given while apportioning the expenses the Rules in this respect should have to be adopted---At the time of apportionment of expenses, FOB value should be taken in the cases of Exports Sales whereas Ex-Factory Price will be taken for the purpose of local supplies---Demand raised on this account was deleted by the Appellate Tribunal as the Federal Board of Revenue itself vide Circular No.05 of 2000 dated 6-3-2000 had directed to prorate on FOB real value with R.216 of the Income Tax Rules, 2002 in the cases of exporters---Appeal on this issue was allowed by the Appellate Tribunal.

2013 PTD 1274 not applicable.

I.T.A. No.1347/LB of 2012; Messrs Treat Corporation Ltd., (sic) and 2003 PTD 1053 ref.

2003 PTD (Trib.) 1053 and I.T.A. No.1347/LB of 2012 rel.

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

----Ss.122(2) & 122(5A)---Amendment of assessment---Limitation---Taxpayer contended that return was filed on 14-1-2008, whereas, order had been passed after five years from the date of filing of return on 29-6-2013, which was time barred under the provision of S.122(2) of the Income Tax Ordinance, 2001; that assessment order had illegally been amended on 29-6-2013 for tax year 2007; and amendment made through Finance Act, 2009, which was effective from 1-7-2009, could not be applied retrospectively; that assessing authority had no lawful justification to amend the order, by which, vested, accrued rights of the taxpayer had damaged, denied and destroyed without legal force and support; and that the law applicable on the first day of assessment will apply and not the one which had come into being by the subsequent legislation---Validity---Order for the tax year 2007 had been passed after the period allowed under the law which was barred by time---Order of First Appellate Authority was vacated and amended order was cancelled by the Appellate Tribunal.

Messrs Master Paint Industry (Pvt.) Ltd. v. CIR LTU I.T.As. Nos.1393/LB and 1409/LB of 2010 rel.

(c) Income Tax---

----Contractual receipt---Nature---Taxpayer contended that claimed contract receipts had wrongly and unlawfully been treated as "Receipts" only on the basis of presumptions as well as without evolving any basis; and that First Appellate Authority had rejected the taxpayer's contention without bringing any material or evidence on record by which, these contract receipts had been turned in terms of "Receipts"---Validity---Taxpayer had claimed contract receipts which had been treated as "Receipts" without giving any basis---Appellate Tribunal directed that claimed "contractual receipts" be accepted as such being raised on the basis of contract.

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

----S.65A---Tax credit to a person registered under the Sales Tax Act, 1990---Disallowance of---Taxpayer contended that claimed tax credit had been disallowed unlawfully on the basis of presumptions; that assessing authority had wrongly calculated the percentage at (53%) of total sales, whereas, the taxpayer had already made 95% of Local Sales to the registered customers; that assessing authority had deliberately/ intentionally taken the gross aggregate sale inclusive of export, while, actually, he was required to calculate the percentage on local sales only, whereas, the taxpayer had already declared above 90% of local sales exclusive of export sales; that at the bar First Appellate Authority had not discussed the application of this credit and non discussion of said issue showed that tax credit under S.65A of the Income Tax Ordinance, 2001 was correctly claimed; that said tax credit had only been claimed against tax liability covered under Normal Tax Regime and assessing authority did not raise any objection, which showed that said tax credit had rightly been claimed; and that same should be allowed---Validity---Tax credit claimed had been disallowed by the Taxation Officer and First Appellate Authority on this issue and had not given any findings---Taxpayer claimed said tax credit only against the tax liability covered under Normal Tax Regime and the Taxation Officer during proceedings raised no objections but had disallowed the claim without any justification and First Appellate Authority had given no findings in that respect---Matter was remanded to the Taxation Officer for consideration with direction to allow the claim of the Tax Credit otherwise to give reasons for not allowing the Tax Credit.

S. Zafar Shah FCA and M. Aurangzeb for Appellant.

Tariq Javed (DCIT) D.R. for Respondent.

Date of hearing: 18th March, 2014.

2015 P T D (Trib.) 292

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sikandar Aslam, Accountant Member

Messrs CRESCENT COTTON MILLS LTD., FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, ZONE-III, LARGE TAXPAYER UNIT, LAHORE

I.T.A. No.1355/LB of 2013, decided on 16th April, 2014.

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

----Ss. 120, 122 & 131---Amendment of assessment---Assessee, a Sugar Mill---Assessing Authority by taking average rate of three Sugar Mills on the basis of being parallel cases, applied sugarcane purchase-rate against the declared rate by the assessee and made addition---Taxpayer had contended that Assessing Authority had failed to mention the provision under which it had applied average rate of sugarcane purchased by said three sugar mills---Assessing Authority repeatedly mentioned in its best judgment order that taxpayer had failed to furnish complete books of account and supporting evidences to substantiate his claim---Appellate Authority upheld stance of Assessing Authority on the basis of non-production of books of accounts and relevant record---Assessing Authority, though had made comparison of sugarcane purchase price of three parallel cases, but failed to confront the taxpayer with the names, NTN/names, area/locality of these sugar mills; and had not fulfilled its legal obligation, and norms of natural justice---Matter was remanded to Assessing Authority, with the directions that after obtaining complete books of accounts, and relevant documentary evidence, taxpayer be confronted with the discrepancies; and ask to submit specific reasons of increased rate of input---Complete names/NTN and locality of said three mills operating, in the area, to be communicated to taxpayer---Taxpayer was directed to co-operate with the department, and provide all relevant records including evidence of payment to the growers made through proper Banking Channel---Matter could be adjudicated according to the facts and circumstances of the case---Appeal on that ground was disposed of by the Tribunal accordingly.

2013 PTD 1274; 1975 PTD 58 and 2011 PTD 2161 ref.

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

----Ss. 5, 6, 7, 8, Proviso, 11, 39(5), 56, 131 & 169(3)---Taxation of dividend Income---Confirmation of---Contention of taxpayer was that action of Appellate Authority below of confirming the taxation of dividend income separately and not allowing adjustment of the same against business loss, was against the expressed provision of law---Assessing Authority, charged income tax 10% as a separate block of income, and did not set off business losses against such income---Appellate Authority confirmed the treatment given by Assessing Authority---Claim of taxpayer was that as a result of insertion of Proviso in S.8 of Income Tax Ordinance, 2001, dividend income was not a separate block of income; that according to S.8, tax deduction under Ss.5, 6, 7 of the Ordinance would be final tax on income on which it was deducted, while company had been specifically excluded from the purview of the final tax by virtue of said Proviso which clearly would mean that tax deducted in respect of dividend income of a company, would not be final tax with effect from 1-7-2007; that S.169(3) of Income Tax Ordinance, 2001, also excluded dividend income of a company; that dividend income, fell under S.39 of Income Tax Ordinance, 2001 under the head "Income from other sources" and that taxpayer had correctly set off the loss against dividend Income in accordance with the provisions of S.56(1) of Income Tax Ordinance, 2001---Main question involved in the case was as to whether dividend Income, chargeable to tax under S.5 of Income Tax Ordinance, 2001, fell under the head "Income from other sources"---Held, that taxpayer had admitted that dividends received by the company were chargeable to tax under S.5 of Income Tax Ordinance, 2001, but had contended that such dividends fell under the head "Income from other sources"---Contention of the taxpayer was not tenable in view of provisions of S.39(5) of the Ordinance---Reliance of taxpayer on the provisions of S.8(c)(ii) of the Ordinance was misplaced because it pertained to the cases falling under "final tax regime"---Appellate Authority had observed in the order that S.56(1) of the Ordinance allowed set off of losses amongst heads of income as specified in S.11 of the Ordinance---Dividend income, was a separate block of income chargeable to tax under S.5 of Income Tax Ordinance, 2001; and did not fall in any head of income as provided in S.11 of Income Tax Ordinance, 2001---Set off losses from other heads or vice versa, could not be allowed under S.56 of Income Tax Ordinance, 2001---Appellate Authority, in circumstances had rightly confirmed the action of the Assessing Authority, which needed no interference on the issue in appeal before Tribunal.

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

----Ss. 5, 6, 7, 8, Proviso, 39(5), 56 & 131---Restriction of tax credit on dividend income---Taxpayer, had contended that restriction of tax credit on dividend income to the extent of Rs.106,400 against claimed at Rs.223,285 without confronting him, was illegal and unjustified---Assessing Authority, disallowed the amount of tax withheld with observations that tax on dividend income of Rs.1,064,000 at the rate of 10% worked out to Rs.106,400; whereas taxpayer had claimed tax deducted at Rs.223,285---Adjudicating Authority, disallowed the difference, Rs.116,885 and Appellate Authority, confirmed that disallowance---Validity---Contention of taxpayer was that dividend income had been disclosed in the accounts for the period from 1-1-2008 to 30-9-2009, whereas tax deduction had been claimed for the period from 1-7-2009 to 30-6-2010---Difference arose on timing---Taxpayer had further claimed that said issue had already been decided in his favour in his own case in assessment years 2000-2001, 2001-2002 and 2002-2003---Issue involved in the case having already been decided by the Tribunal in favour of the taxpayer in its own case, there was no reason to interfere with the earlier decision---Appeal was allowed---Adjudicating Authority was directed to allow the credit of Rs.223,285 after necessary verifications.

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

----Ss.39(3) & 131---Income from other sources---Addition under S.39(3) of Income Tax Ordinance, 2001---Appeal to Appellate Tribunal---Taxpayer (company) received loans from Directors/Key Management amounting to Rs.72,736,000---Adjudicating Authority inferred that no evidence was provided that payments were made through proper Banking Channel, and authority proceeded to disallow the amount under S.39(3) of Income Tax Ordinance, 2001; as the taxpayer had failed to furnish any reply---Appellate Authority confirmed the treatment meted out by the Adjudicating Authority---Plea of taxpayer was that Adjudicating Authority was requested to allow submission of evidence, which was rejected and best judgment order was framed without honouring request for adjournment---Taxpayer, explained that the income under review, consisted of Rs.69,691,000 which was outstanding against provident fund and salaries payable---Balance amount of Rs.3,045,000 was received through the proper Banking Channel---Matter had not been properly adjudicated by the authorities below; and addition had been made in a slipshod manner---Case was remanded to Assessing Officer for de novo consideration in accordance with the law for fresh adjudication---Order accordingly.

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

----Ss. 21(c), 149, 165 & 131---Deduction in computing income under head "Income from business"---Addition under S.21(c) of Income Tax Ordinance, 2001---Taxpayer, had claimed that addition of Rs.5,529,612 under S.21(c) of Income Tax Ordinance, 2001, in respect of the payments made to the Directors was illegal and unjustified as tax was duly deducted and deposited into Government Treasury, whenever applicable---Adjudicating Authority in its order had observed that the taxpayer had shown huge payments on account of salaries and perquisites to Directors and executives, for the relevant period which were not reflected in the annual statement of withholding taxes filed under Ss.149/165 of the Income Tax Ordinance, 2001---Adjudicating Authority added the difference of perquisites and benefits; on which tax was not withheld by the taxpayer for the year under consideration---Said treatment was confirmed by Appellate Authority---Submission of taxpayer was that the difference in figures appearing in the accounts and the statement filed under S.149 of Income Tax Ordinance, 2001, was on account of time difference of the accounting period of taxpayer i.e. between 1-10-2008 to 30-9-2009 and the period for which statement had been filed from 1-7-2009 to 30-6-2010---Taxpayer also added that present issue had been decided in its favour in its own case in assessment years 2001-2002 and 2002-2003---Validity---Present issue was based on fact, rather than legal one and had neither been properly examined by the Assessing Officer, nor adjudicated by Appellate Authority---Case was remanded to Assessing Officer for de novo consideration in accordance with law; with direction that after obtaining necessary statement under Ss.149/165 of the Income Tax Ordinance, 2001, complete analysis would be made as per relevant provisions of law---Order accordingly.

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

----Ss. 111 & 131---Unexplained income or assets---Inclusion in the income chargeable to tax---Adjudicating Authority, had taken the amounts of tax paid as appearing in the cash flow statement and as claimed in the return of income, and added back the difference under S.111 of Income Tax Ordinance, 2001---Taxpayer, explained that the additions were made by ignoring his written submission---Contentions of taxpayer was that break-up of income tax paid as shown in cash flow statement and as claimed in the return of tax year 2010, was due to difference between the tax paid shown in the cash flow statement, and tax deductions claimed in the return of income; that Adjudicating Authority had made addition under S.111 of Income Tax Ordinance, 2001 without even mentioning the specific provision of law, which was not tenable---Validity---Even if there was alleged difference in figure, same could not be equated with "concealment of income", until and unless the department had proved beyond any doubt that the nature and source of such amounts were unexplained and attracted the provisions of S.111 of Income Tax Ordinance, 2001---Adjudicating Authority, had made a huge addition, without going into the legal as well factual realities of the case---Burden of proof rested on the department to prove that any wrong-doing had been done---Said burden having not been properly discharged by Adjudicating Authority, case was remanded for de novo consideration, according to the facts and circumstances of the case---Order accordingly.

2012 PTD 1775 (Trib.) and 2006 PTD 2828 ref.

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

----Ss. 23 & 131---Initial depreciation---Disallowance of---Assessee, a company running sugar Mill---Adjudicating Authority, disallowed initial depreciation, claimed by the taxpayer in his return, being not in accordance with the provisions of S.23 of Income Tax Ordinance, 2001 with observations that no addition in assets had been made during the year, rather various parts of the existing plant and machinery were replaced---Appellate Authority, confirmed action of Adjudicating Authority---Contentions of taxpayer was that initial depreciation had been disallowed by Adjudicating Authority, with the observations that no new plant and machinery was added; that both authorities below had ignored the fact that every year, in sugar industry, complete overhauling of plants and machinery was carried out to bring same in serviceable condition and that Adjudicating Authority had failed to allow normal depreciation on the assets against which the initial allowance had been disallowed---Validity---Adjudicating Authority had made additions without specifying any instance---In absence of specific description, it could not be ascertained as to whether new plant and machinery was added, or addition in the existing plant and machinery were made---Case was remanded for de novo consideration, with the direction that disallowance on account of initial depreciation, would be examined as per law and after ascertaining facts, normal depreciation to the company could be allowed.

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

----Ss. 21(c)(m), 131, 149 & 165---Additions made under S.21(c)(m) of the Ordinance---Appeal to Appellate Tribunal---Taxpayer had alleged that Adjudicating Authority had made the combined addition under S.21(c)(m) of Income Tax Ordinance, 2001, which itself was illegal ab initio void; that issue related to time difference was not properly adjudicated by Adjudicating Authority, without any specific default and that Appellate Authority had failed to give findings on the issue, despite the fact that said ground was raised before the Authority---Validity---Appellate Authority, having not adjudicated the issue although the taxpayer had raised that ground at the first appellate stage, case was remanded to the said Authority to adjudicate the matter on the issue, and give clearcut findings after providing an opportunity of hearing to both the sides---Order accordingly.

(i) Income Tax Rules, 2002---

----R. 231---Apportionment of expenses between local and export sales---Taxpayer, had contended that Adjudicating Authority, had wrongly apportioned expenses between local and export sales by ignoring the relevant provisions of law and circulars issued by the FBR in that regard; that Appellate Authority was not justified to confirm the addition of amount and that Adjudicating Authority, allocated amount of expenses from normal income to the export proceeds, and action of Adjudicating Authority, was confirmed by Appellate Authority---Validity---Controversy related to the ratio for allocation of expenses, between the normal sales and the exports---Rule 231 of Income Tax Rules, 2002 dealt with the computation of export profits and tax attributable to export sales---Said Rule had clearly stated that the export sales were taken on F.O.B. price of the goods exported for apportionment purpose---Contention of taxpayer that the identifiable expenses were required to be excluded from the export proceeds, while apportioning common expenses, was not correct in the face of express provisions of R.231 of Income Tax Rules, 2002---Adjudicating Officer, had rightly apportioned expenses on the ratio of normal sales and exports by excluding the identifiable expenses---Interference with the findings of the authorities below on issue in question was declined by Tribunal.

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

----S. 57(1)(4)---Set off of brought forward and unabsorbed depreciation---Adjudicating Authority, while computing the total income, did not set off brought forward business losses and unabsorbed depreciation against the income from other sources according to the provisions of S.57(4) of Income Tax Ordinance, 2001---Adjudicating Authority, was of the view that S.57(1) of Income Tax Ordinance, 2001, referred to business loss, and could only be offset against business income---Appellate Authority had confirmed said treatment of Adjudicating Authority---Validity---Held, that taxpayer was entitled to set off the assessed income against brought forward business loss and unabsorbed depreciation---Adjudicating Authority, was directed to allow effect of unabsorbed depreciation and brought forward business loss after necessary verification---Matter was accordingly remitted to Assessing Officer for de novo consideration.

1996 PTD (Trib.) 292 and 2003 PTD (Trib.) 1464 ref.

Muhammad Arshad, ITP for Appellant.

Waqas Rasheed, D.R. for Respondent.

Date of hearing: 25th February, 2014.

2015 P T D (Trib.) 319

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haq Khan, Accountant Member

C.I.R., ZONE-IV, LTU, KARACHI

Versus

Messrs PEARL SECURITIES (PVT.) LTD. KARACHI

F.E.A. No.77/KB of 2012, decided on 5th November, 2013.

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

----Ss.3, 2(23), 8, 12(2), 14, & First Sched: Entry No.13---Income Tax Ordinance (XLIX of 2001), Ss.122(5A), 18(2), 39 & 2(46)---Federal Excise Rules, 2005, Rr.40A(4) & 43C---S.R.O. No. 550(I)/2006 dated 5-6-2006---Duties specified in the First Schedule of Federal Excise Act, 2005 to be levied---Stock broker---Brokerage service---Commission---Late charges---Levy of Excise Duty on late charges was being ancillary service---First Appellate Authority had found that stock brokers were required to pay Federal Excise Duty on their brokerage services only in respect of purchase or sale of share in Stock Exchange and the "Late Charges" earned for the arrangement of financing facilities were distinctly different from the brokerage and commission in respect of purchase or sale of shares in a Stock Exchange; that other income i.e. "Late Charges" will not attract Federal Excise Duty in sales tax mode; that if mark up on financial services were covered even then the same will not attract Federal Excise Duty in sales tax mode as the same were exempt from Federal Excise Duty under R.40A(4) of the Federal Excise Rules, 2005 meaning thereby that services rendered by the taxpayer did not fall under the services rendered by stock brokers as provided under R.43C of the Federal Excise Rules, 2005---Revenue contended that under S.12(2) of the Federal Excise Act, 2005 were taxable which included all the services provided in the brokerage house; that mark-up paid on loan to banks (reflecting in liability side of balance sheet as loan against equity requirement and trading of shares) and on asset side as debtor to various customers and mark-up received on the said facility was actually ancillary service to the commission earned from the customers; that it was a service receipt and excisable item; and entire income was commission service or ancillary services as was evident from audited accounts; that late payment charges were the nature of services provided in the brokerage house; that all services in brokerage house were excisable in nature; that considering the late payment charges as mark-up within the meaning of Sub-rule (4) of R.40A and claiming itself as the financial institution or the banking company was against the factual position; and that taxpayer received only the late payment charges and those were ancillary to brokerage house services i.e. commission---Validity---Department had accepted the contention of the taxpayer that late payment receipts did not form part of gross commission earned from sale and purchase of shares for the purpose of Federal Excise and Income Tax vide order under S.14 of the Federal Excise Act, 2005 and under S.122(5A) of the Income Tax Ordinance, 2001---Late payment charges was not earned as part of such systematic or organized course of activity or conduct with a set purpose the said receipt was rightly assessed under S.39 of the Income Tax Ordinance, 2001 as income from other sources and not as income from business under S.18(2) of the Income Tax Ordinance, 2001---Once the department had accepted the stance of the taxpayer while proceeding under S.122(5A) of the Income Tax Ordinance, 2001 by the Senior Officer in rank and also in the subsequent Federal Excise proceedings, a different view altogether taken by the department was nullity in the eye of law and the taxpayer by any stretch of imagination could not be burdened with the Federal Excise Duty and the department could not blow hot and cold in the same breath to ignore favour to taxpayer---Kaleidoscopic assessments were being made by the Revenue Department without knowing or analyzing the exact nature of business and nature and status of receipt (late payment receipt)---Late payment charges was not "income from business" and not part of commission income/brokerage income when the department itself treated the same as late payment (mark-up) income from other sources---Subsequent revenue was not the part of Gross Commission and Federal Excise Duty was not to be levied.

Messrs Gear Hobbings Ltd.'s case 2003 PTD 739; 2004 PTD (Trib.) 2352; Civil Appeals Nos. 1866/1996, 1262/1999, 1288/2000, 1293, 1294, 1296 and 1306 of 2001; CIT Karachi v. Gelcaps (Pvt.) Ltd. Karachi 2009 PTD 331; Advance Law Lexicon 3rd Edition pages 886-887; Harihar Raw Cotton Pressing Factory v. CIT (1960) 39 ITR 594, 610; I.T.As. Nos.923/924/KB of 2012 dated 7-10-2013; 2012 PTD (Trib.) 954; Cape Brandy Syndicate v. Commissioner of Inland Revenue (1921) 12 Tax Cas. 358; CIT Balkrishna Malhotra's case 81 ITR 759 at 762; 1989 SCMR 353; PLD 1970 SC 453; 2003 PLC (C.S.) 1222 and PLD 1965 SC 412 rel.

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

----S.31(3)---Power of adjudication---Limitation---Agreed date of show cause notice was 30-9-2011---Date of Order-in-Original was 15-6-2012---167 days were consumed---Taxpayer contended that officer was bound to pass the order within 120 days---Provisions of S.31(3) of the Federal Excise Act, 2005 permitted further extensions of 60 days for reason to be recorded in writing and 30 days in case the adjournments availed by the taxpayer---Total number of 210 days were available to the officer to pass an Order-in-Original---Record revealed that case was heard on 7-10-2011, 25-11-2011, 22-2-2012 and 28-2-2012---Hearing and factual grant of opportunities and adjournments fully justified the officer to step in the additional time limits, which was beyond 120 days and also construed valid reason---Order-in-Original was within days of statutory time limit.

(c) Interpretation of statutes---

----Departmental practice---Where departmental practice had followed a particular course in implementation of some rule, whether right or wrong, it would be extremely unfair to make a departure from it and thereby disturb rights that have been settled by a long and consistent course of practice.

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

----S.11---Heads of income---Determination of---It was not open either to the Revenue or to the taxpayer to claim that an income which clearly fell under one head should be dealt with under a different head for the purpose of Income Tax Ordinance, 2001---For determining under which head an income will fall, its commercial character was a relevant factor---Time or method of book-keeping by the taxpayer was not relevant consideration---This is decided from the nature of the income by applying practical notions and not by reference to treatment by the taxpayer in his books of account---In income wrongly included by the Officer of Inland Revenue under one head could be taken out from that head, and included under the correct head, in appeal proceedings.

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

----S.10---"Total income"---Scope---Section 10 of the Income Tax Ordinance, 2001 provide scope of total income with reference to residential status of the person---Where a person was resident, its total world income (Pakistan source as well as foreign source) was chargeable to tax---In case of non-resident person, only Pakistan source income was taxable under the Ordinance---Where an income was Pakistan source was to be tested on the criteria given in S.10 of the Income Tax Ordinance, 2001.

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

----S.15---Heads of income---Section 15 of the Income Tax Ordinance, 1979 showed that, the sole criterion to classify the income under S.15 of the Income Tax Ordinance, 1979, in ordinary course, was the source and/or the nature of activity and conduct wherefrom and/or whereby the particular income was being generated---As long as the sources could be factually found, circumstances seldom had any bearing on the characteristic of income.

CIT Karachi v. Gelcaps (Pvt.) Ltd. Karachi 2009 PTD 331 rel.

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

----S. 3---Constitution of Pakistan, Art. 77---Federal Excise duties specified in the First Schedule of the Act to be levied---No tax could be levied or collected except under the constitutional authority---Principle.

(h) Federal Excise Rules, 2005---

----R.43C---Special procedure for services provided by stockbrokers---Scope---Federal Excise Duty was applicable on the commission earned from clients in respect of purchase or sale of shares in a stock exchange---Words used in R. 34C "purchase or sale of shares" have significant value, which restrict the activity to the sale and purchase of shares and not other activities.

(i) Federal Excise Rules, 2005---

----R.43C---S.R.O. No.550(I)/2006 dated 5-6-2006---Special procedure for services provided by stockbrokers---Notification No.S.R.O. No. 550(I)/2006 dated 5-6-2006 read with R.43C of the Federal Excise Rules, 2005 revealed that the stock brokers were required to charge and pay Federal Excise Duty on their Gross Commission services only in respect of purchase or sale of share in a Stock Exchange.

Advance Law Lexicon 3rd Edition Page 886-887 rel.

(j) Taxation---

----Taxes are the life-blood of any government---Principles.

(k) Interpretation of statutes---

----"Principles of consistency and certainty" occupy a very prominent position in the law of precedent which has to be adhered to by the government departments in order to maintain discipline in the administration of justice.

(l) Interpretation of statutes---

----Fiscal statutes---Taxation, doctrine of---Principles.

(m) Interpretation of statutes---

----Taxing statute must be construed strictly---Implication---True implication of the principle that "taxing statute must be construed strictly" is often misunderstood and the principle is unjustifiably extended beyond the legitimate field of its operation.

(n) Interpretation of statutes---

----Principles that "there is no equity about a tax" and "there is no presumption as to a tax"---Explained---There is no equity about a tax in the sense that a provision, by which a tax is imposed, has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the tax-payer---If the subject falls squarely within the letter of law, he must be taxed, howsoever inequitable the consequences may appear to the judicial mind---If the revenue seeking to tax cannot bring the subject within the letter of law, the subject is free, no matter that such a construction may cause serious prejudice to the revenue---In other words, though what is called equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute---Subject is not to be taxed unless the charging provision clearly imposes the obligation.

(o) Precedent---

----Conflict of precedent---Duty of judge---Proposition that a judge, faced with a conflict of precedent, should abdicate his judgment and accept the view, which is favourable to the taxpayer was wrong---Where, however, a judge finds that two equally reasonable views are possible and he is unable to decide which is the better view, that he may adopt the rule of interpretation that the view favourable to the taxpayer might be accepted---Taxing provision must receive a strict construction at the hands of the courts and if there is any ambiguity, the benefit of that ambiguity must go to the taxpayer, but this is not the same thing as the saying that a taxing provision should not receive a reasonable construction---Judge's duty is to consider which is the more reasonable view and accept the one which is more reasonable---Where a judge finds that both the views were equally reasonable there he may resort to the rule of interpretation favouring the taxpayer.

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

----Ss.3, 2(23), 8, 12(2), 14, & First Sched: Entry No.13---Income Tax Ordinance (XLIX of 2001), Ss.122(5A), 18(2), 39 & 2(46)---Federal Excise Rules, 2005, Rr.40A(4) & 43C---S.R.O. No.550(I)/2006 dated 5-6-2006---Duties specified in the First Schedule to be levied---Stock brokers---Brokerage services---Late payment charges---Levy of Excise Duty---Legality---Summary of findings of Appellate Tribunal---Business i.e. commission income will continue to accrue if the facility of arranging finances haults---Late payment charges are not earned where the borrower complied with terms of repayment but commission is duly earned on normal sale/purchase transaction---As a stock broker, the remuneration consists solely on commission and taxpayer may not be interested in the profits or losses made by its clients/customers---Two activities i.e. commission on sale/purchase of shares and late payment charges are capable of performance independently from each other---Taxpayer as a stock broker does not owe any liability to lenders but he owes duty of care and skill to its clients in respect of sale and purchase of shares---Late payment receipt did not spring or emanate from main business activity earning and deriving "commission" on purchase and sales of shares---Inland Revenue department accepted such distinction in taxpayer's own case in its order under S.122(5A) of the Income Tax Ordinance, 2001 for tax year 2010 and 2011---Late payment charges/receipt is not earned as a part of such "Systematic or organized course of main business activity or conduct with a set purpose"---Said receipt [Late Payment charges] rightly assessed under S. 39 of the Income Tax Ordinance, 2001 as "Income from other Sources" and not as "Income from business" under S.18(2) of the Income Tax Ordinance, 2001---Where taxpayer is stock member/broker mainly earning commission on purchase and sale of shares, receipt on "late payment charges" was not in his capacity as stock broker on purchase and sale of shares but as guarantor discharging altogether different nature it cannot be treated as "Commission income on sale and purchase of shares" hence, not to be treated as "business income"---Late payment receipt irrespective of the head under which such receipt/income falls is not liable to levy of Federal Excise Duty being outside purview of excisable services on purchase and sale of shares by stock broker---Inland Revenue department accepted the contention of the taxpayer by passing order under S.14 of the Federal Excise Act, 2005 for the period ended on 30-6-2011 which still hold ground---Held, subject was not be taxed unless the charging provision clearly imposed the obligation with valid legislative letter of law.

Messrs Gear Hobbings Ltd.'s case 2003 PTD 739; 2004 PTD (Trib.) 2352; Civil Appeals Nos. 1866 of 1996, 1262/1999, 1288/2000, 1293, 1294, 1296 and 1306 of 2001; CIT Karachi v. Gelcaps (Pvt.) Ltd. Karachi 2009 PTD 331; Advance Law Lexicon 3rd Edition Pages 886-887; Harihar Raw Cotton Pressing Factory v. CIT (1960) 39 ITR 594, 610; I.T.As. Nos.923/924/KB of 2012 dated 7-10-2013; 2012 PTD (Trib.) 954; Cape Brandy Syndicate v. Commissioner of Inland Revenue (1921) 12 Tax Cas. 358; CIT Balkrishna Malhotra's case 81 ITR 759 at 762; 1989 SCMR 353; PLD 1970 SC 453; 2003 PLC (S.C.) 1222 and PLD 1965 SC 412 rel.

Shafqat Hussain Keehar, D.R. for Appellant.

Abdul Qadir Memon and Rashid Malik for Respondents.

Date of hearing: 8th October, 2013.

2015 P T D (Trib.) 360

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs WAJAHAT TEXTILES, FAISALABAD

Versus

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

S.T.A. No.99/LB of 2014, decided on 14th February, 2014.

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

----Ss. 11(2), 11(3), 2(37), 3, 6, 7, 8, 8A, 23, 26, 33, 34 & 73---S.R.O. No.283(I)/2011 dated 1-4-2011---S.R.O. No.1012(I)/2011 dated 4-11-2011---S. R. O. No. 1058(I)/2011 dated 23-11-2011---S. R. O. No. 1125(I)/2011 dated 31-12-2011---Assessment of tax---Commercial importer and wholeseller---Discrepancies reported through CREST---Combined show-cause notice under Ss.11(2) & 11(3) of the Sales Tax Act, 1990 for recovery of tax---Validity---Both the provisions i.e. Ss.11(2) & 11(3) of the Sales Tax Act, 1990 were distinct in nature---Section 11(2) of the Sales Tax Act, 1990 would only apply where person had not paid the tax due on supplies made by him and S.11(3) of the Sales Tax Act, 1990 only be invoked on a registered person in case of his "collusion" with the tax officials or due to a "deliberate act"---Show-Cause Notice was completely silent in regards to "collusion" or "deliberate act" on the part of taxpayer---Very basis for acquiring the jurisdiction by issuing a combined notice under two different sections was fatal---Combined notice issued under Ss.11(2) & 11(3) of the Sales Tax Act, 1990 was liable to be declared null and void---Provision of Ss.11(2) & 11(3) of the Sales Tax Act, 1990 were even otherwise different and independent in their application and intention of legislature in this regard could also be verified from the fact that after filing a monthly sales tax return claimed input tax credit or refund which was not admissible under S.11(2) of the Sales Tax Act, 1990 the Inland Revenue Officer shall issue the Show-Cause Notice whereas in S.11(3) of the Sales Tax Act, 1990 revealed that no specific charge "collusion or deliberate act" was levelled in the subject Show-Cause Notice---In absence of any detail or proper allegation regarding "collusion or deliberate act"; it could not be said that the notice had been issued under S.11(3) of the Sales Tax Act, 1990---Whole procedure regarding application of both provisions was provided separately and independently by the legislature---Simultaneous application of Ss.11(2) 11(3) of the Sales Tax Act, 1990 was liable to be declared illegal and void ab initio---Both the orders and Show-Cause Notice of the authorities below were declared to be illegal, void and without lawful authority and legal impropriety and the same was set aside by the Appellate Tribunal.

2009 PTD 281; 2011 PTD 346; 2012 PTD 1016; 2005 SCMR 492; 1997 SCMR 641; 2011 PTD (Trib.) 770 and Fasih-ud-Din Khan's case 2010 SCMR 1778 rel.

(b) Interpretation of statutes---

----Where a statute affects a substantive right, it operates prospectively unless by express enactment or necessary intendment retrospective operation had been given---Statute, which was procedural in nature, operates retrospectively unless it affects an existing right on the date of promulgation or causes injustice or prejudice to a substantive right.

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

----S.11(5), proviso---Assessment of tax---Limitation, extension of---Proviso to S.11(5) of the Sales Tax Act, 1990 reflected the aspect that plain words and patent meanings of law were to be applied and interpreted as they were and not latent meanings were to be attached to the patent words which convey the plain and obvious meaning---Commissioner can extend time limit of the Show-Cause Notice within the parameters as provided in the proviso but admittedly in the present case, at no stage of the proceedings, he applied his independent consideration and passed a speaking order---Show-Cause Notice being void ab initio and order passed was unlawful on the face of it.

Muhammad Imran Rashid for Appellant.

Sajjad Tasleem, D.R. for Respondent.

Date of hearing: 14th February, 2014.

2015 P T D (Trib.) 386

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Sajjad Ali, Accountant Member

I.T.As. Nos. 1510, 1511/LB of 2013, decided on 7th January, 2014.

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

----Ss. 18(1) (d) & 122(5A)---Income from business---Interest free cash loan from directors---Taxation of the benefit availed by the company---Taxation Officer as well as First Appellate Authority based their orders on that if the taxpayer would have obtained loan from unrelated parties, it would have required to bear the brunt of financial cost by payment of mark-up at market rates; and creditors who had advanced loans to the taxpayer would have received mark up/profit which would have been included in their taxable income and would have been an engine for increase in their tax liability; that provisions deal with benefit in an economic sense and not from point of view of tax benefit; and that addition made by the Taxation Officer was upheld by the First Appellate Authority being patently in accordance with provisions of law---Taxpayer contended that it was mandatorily required under the principles of accounting and law to charge interest on borrowed money, the interest would have paid being allowable/admissible expense will resultantly reduce the taxable income as well as tax liability of the taxpayer; and the treatment given by the assessing officer to the transactions was against the principles of basic accountancy and provisions of law---Validity---Clause (d) of Sub-S.(1) of S.18 of the Income Tax Ordinance, 2001 provided that the fair market value of any benefit or perquisite, whether convertible into money or not arising in the course of, or by virtue of a past, present or prospective business relationship shall be income from business and was chargeable to tax in the Income Tax Ordinance, 2001---Both the officers below fell in grave error in misconceiving the accounting principles and relevant law on the issue and as such "deemed income" was wrongly charged to tax by invoking provision of S.18(1)(d) of the Income Tax Ordinance, 2001---Observations made by the Taxation Officer reflected lack of understanding on the facts as well as law "the provisions dealt with benefit in an economic sense and not from the point of view of tax benefit"---Interest/mark-up if not paid by the taxpayer was a financial benefit at one part while on the other part it was quite obvious that the taxpayer must charge the same amount in its accounts as expenditure and under the Income Tax Ordinance, 2001 the revenue would allow the same as an admissible deduction---In actual fact it was a benefit/income in shape of not claiming/charging the expenses/liability under the head mark-up on interest free loans---Deemed mark-up again was a double jeopardy by taxing one thing twice---If revenue preferred to treat said deemed interest/markup as taxable business income under S.18(1)(d) of the Income Tax Ordinance, 2001 then it would also be a lawful right of the taxpayer to reduce its business income by claiming/deducting same amount---Was not the choice of pick and choose by treating the same as business income and charged to tax separately in isolation without realizing the basic accounting principles that at the same time it was also a deductible admissible allowance in the hands of taxpayer---Order passed was patently illegal and violative of the law, especially express provisions and spirit of the law, which order if allowed to stay would intact would tantamount to and caused prejudice and serious breach of legal rights of taxpayers/citizens---Orders passed by authorities below were perverse, erroneous, factually incorrect and had resulted in great miscarriage of justice and were squarely in conflict with statutory stipulation and fatally flawed, which must be struck down decisively---Addition made was patently illegal and nullity in the eyes of law---Section 18(1)(d) of the Income Tax Ordinance, 2001 had no application whatsoever to the present case, where interest free loan was received by the taxpayer---Orders passed by the authorities below were cancelled by the Appellate Tribunal.

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

----S.21(c)---Deductions not allowed---Un-paid Workers Profit Participation Fund---Addition of---Accrual basis accounts---Taxpayer contended that amount of workers profit participation fund was payable as on 30th June was paid in the next financial year; that provision was made by the auditors at the time of finalization of account in the month of September/October; that accounts were prepared on accrual basis and an expense was charged to the relevant year as per International Accounting Standard; and that in case of addition under S.21(c) of the Income Tax Ordinance, 2001, even after passing of any adverse order against the taxpayer, if any payer (claimant of expenditures) subsequently deposited the amount of withholding income tax, before the completion of assessment proceedings then resultant addition of S.21(c) of the Income Tax Ordinance, 2001 could not be made and the claim should have been allowed in full in accordance with the provisions of Income Tax Ordinance, 2001---Validity---Since the case of the taxpayer had not been considered on said two points judiciously by the assessing authority who was the basic fact finding authority under the law, assessing authority was directed by the Appellate Tribunal to start the proceedings afresh subject to all due exceptions after giving proper opportunity of being heard to the taxpayer, who stated that he had all the necessary proof of payments and evidence which may be verified properly and then pass a judicious order---Taxpayer was also directed to cooperate with the assessing authority for finalization of re-assessment proceedings on said score and provide all data/proof of payments made on account of Workers Profit Participation Fund and income tax deduction with respect of the addition made under S.21(c) of the Income Tax Ordinance, 2001.

Waheed Shahzad Butt for Appellant.

Mrs. Ghazala Hameed Razi, D.R. for Respondent.

Date of hearing: 7th January, 2014.

2015 P T D (Trib.) 416

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

Messrs ASGHAR SURGICAL WORKS, DASKA

Versus

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

S.T.A. No.1203/LB of 2013, decided on 1st July, 2014.

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

----Ss.4(c) & 3(1)---S.R.O. 283(I)/2011 dated 1-4-2011---S.R.O. 1058(I)/2011 dated 23-11-2011---S.R.O. 1125(I)/2011 dated 31-12-2011--Tax period 15-3-2011 to 30-6-2012---Zero rating - Surgical goods---Application of standard rate of tax---Taxpayer contended that despite zero-rating of sales tax on surgical instruments being notified goods by the Federal Government under S.4(c) of the Sales Tax Act, 1990, Officer of Inland Revenue was bent upon to adjudge sales tax liability at standard rate of sales tax of 16% or as the case may be, 17% under S.3(1) of the Sales Tax Act, 1990 without any lawful excuse and an adverse order had been passed---Validity---Surgical goods remained zero rated unconditionally without any restriction thereon till inception of Notification No.S.R.O. 283(I)/2011 dated 1-4-2011 made applicable retrospectively on 15-4-2011, wherein zero rating facility had been restricted to registered persons only and in case supply of notified goods was made to unregistered person, sales tax shall be charged at the rate of 6% thereon, which had been revised to 4% under Notification No.S.R.O. 1058(I)/2011 dated 23-11-2011 and again had been revised to 5% under Notification No. S.R.O. 1125(I)/2011 dated 31-12-2011---By virtue of all such statutory regulatory amendments, the applicable rate of sales tax on surgical goods for the period from 15-3-2011 to 30-6-2012 was six percent, four percent and five percent respectively and in no way, standard rate of sales tax of sixteen percent or as the case may be, seventeen percent could be applied on its supply made in that very period---Provisions of S.3 of the Sales Tax Act, 1990 were, no doubt, charging provisions for the purposes of sales tax on which whole edifice of value added general sales tax was built, same had nothing to do with the goods falling under S.4 of the Sales Tax Act, 1990, which started with a non-obstante clause, "Notwithstanding the provisions of S. 3"---Section 4 of the Sales Tax Act, 1990 had an overriding effect on the provisions of S.3 of the Sales Tax Act, 1990---Non-obstante clause was usually used in a provision to indicate that the provision should prevail despite anything to the contrary in the provision mentioned in such a non-obstante clause---When there was any inconsistency between non-obstante clause and another provision, one of the objects of such a clause was to indicate that it was a non-obstante clause, which would prevail over the other clause---Since the goods in question had been specified as zero rated goods by virtue of various notifications under S.4(c) of the Sales Tax Act, 1990, provisions of S.3 of the Sales Tax Act, 1990 for chargeability of sales tax at standard or any other rate on all such notified goods would never come into play due to existence of non-obstante clause in the Preamble of S.4 of the Sales Tax Act, 1990---Provisions of S.4 of the Sales Tax Act, 1990 would prevail on the provisions of S.3 of the Sales Tax Act, 1990---Sales tax on surgical goods shall be charged and levied at the rate of zero-percent as specified in S.4 of the Sales Tax Act, 1990 providing complete ouster to standard or any other rate of sales tax specified in S.3 of the Sales Tax Act, 1990---Appeal was accepted by way of vacating the orders passed by both authorities below being devoid of legal substance.

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

----Ss.11(3) & 36(1)---S.R.O. 621(I)/2005 dated 17-6-2005---Assessment of tax and recovery of tax not levied or short-levied or erroneously refunded---Tax period July, 2009 to June, 2012---Taxpayer contended that recovery of sales tax not levied and not charged for the period from 1st July, 2009 to 30th June, 2012 had been adjudged by invoking provisions of S.11(3) of the Sales Tax Act, 1990 whereas, it had to be adjudged under S.36(1) of the Sales Tax Act, 1990 as the provisions of S.11(3) of the Sales Tax Act, 1990 had been inserted in the Statute Book with effect from 1st July, 2012 by the Finance Act, 2012; and these provisions were not applicable retrospectively as no saving clause for protection of provisions of S.36 of the Sales Tax Act, 1990 had been found given therein and in absence of such provision recovery of sales tax, short levied, not levied or amount erroneously refunded could not be adjudged under S.11(3) of the Sales Tax Act, 1990---Validity---Provision of S.36(1) of the Sales Tax Act, 1990 or as the case may be, S.36(2) of the Sales Tax Act, 1990 would come into play in all old cases of recovery for the period prior to 1st July, 2012---Provisions of S.4 of the Sales Tax Act, 1990 being "non-obstante clause" had an overriding effect over the provisions of S.3 of the Sales Tax Act, 1990---Due to said non-obstante clause under S.4 of the Sales Tax Act, 1990 on the goods notified in its Sub-Clause (c) by the Federal Government was chargeable at zero percent---'Surgical goods' had been put to zero-rating sales tax regime on 6-6-2005 by virtue of Notification No. S.R.O. 621(I)/2005 dated 17-6-2005 and remained effective to sales tax at zero percent up to 14-3-2011---Recovery of sales tax not levied and not charged on supply of goods made during July-2009 to June-2012 in the Show-Cause Notice and consequent adjudication order had been adjudged under S.11 (3) of the Sales Tax Act, 1990 which came into being w.e.f., 1st July, 2012 by virtue of Finance Act, 2012---Provisions of said section had not been made applicable retrospectively by the legislature as the provisions of S.36(1) of the Sales Tax Act, 1990 providing limitation of five years and S.36(2) of the Sales Tax Act, 1990 providing limitation of three years respectively for issuance of Show-Cause Notice in different tax situations had been kept intact for all recovery cases for the period prior to 1st July, 2012 on account of sales tax short levied, not levied or any amount erroneously refunded---Despite deletion of S.36 of the Sales Tax Act, 1990 from the Statute Book, one could find its existence in S.25(3) of the Sales Tax Act, 1990 for audit purposes and in S.45B of the Sales Tax Act, 1990 for appeal before the Commissioner Inland Revenue, in all such old recovery cases pertaining to the period before its deletion---No saving clause for cases of S.36 of the Sales Tax Act, 1990 particularly the cases falling under S.36(2) of the Sales Tax Act, 1990 had been provided in S.11(3) of the Sales Tax Act, 1990---In all old cases, recovery of sales tax had to be adjudged under S.36(1) of the Sales Tax Act, 1990 or as the case may be, under S.36(2) of the Sales Tax Act, 1990---Even otherwise, provisions of S.11(3) of the Sales Tax Act, 1990 were not deemed to be curative, remedial and beneficial in nature as it curtailed right of a registered person not to be called upon to Show-Cause Notice after expiry of time limitation under S.36(2) of the Sales Tax Act, 1990 by impeding him with tax liabilities beyond three years in case of inadvertence, error and misconstruction as well; and could not be made applicable retrospectively on this general principle of law---Adjudicating authority had erred in invoking provisions of S.11(3) of the Sales Tax Act, 1990 for recovery of sales tax for the period prior to its insertion in all cases squarely falling under S.36(1) of the Sales Tax Act, 1990 or as the case may be under S.36(2) of the Sales Tax Act, 1990.

2009 PTD (Trib.) 654; 2009 PTD 1314 and PLD 1991 SC 258 rel.

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

----S. 33---S.R.O. 494(I)/2013 dated 10-6-2013---Offences and penalties---Amnesty Scheme---Taxpayer contended that sales tax liability for the period from 15-3-2011 to 30-6-2012 had been discharged through cash payment by availing amnesty scheme; and whole principal amount of sales tax had been paid before 30-6-2013 during currency of amnesty scheme; and recovery on account of default surcharge and penalties shall remained abated---Validity---Since taxpayer had discharged his sales tax liabilities by way of depositing principal amount of sales tax within the time frame given under amnesty scheme granted by the Federal Government through a notification duly published in the official gazette, nothing remained payable as an additional amount on account of any default surcharge and penalty.

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

----S.33(2), (5), (7), (8) & (13)---Offences and penalties---Heavy penalties had been imposed and adjudged in the adjudication order, whereas no such penalties under the provisions of any of subsections of S.33 of the Sales Tax Act, 1990 had been cited and confronted in the Show-Cause Notice---Validity---No penalty under any subsections (2), (5), (7), (8) & (13) of S.33 of the Sales Tax Act, 1990 could be imposed and adjudged against a taxpayer through an adjudication order until and unless each and every subsection was specifically confronted in the Show Cause Notice and if any penalty was imposed without confronting the relevant provisions as contained in any subsections of S.33 of the Sales Tax Act, 1990, it would definitely fall beyond the scope of Show-Cause Notice which would render the same illegal, unlawful and void ab initio.

Abu Zar Hussain for Applicant.

Ms. Fouzia Adil, D.R. for Respondent.

Date of hearing: 23rd April, 2014.

2015 P T D (Trib.) 428

[Inland Revenue Appellate Tribunal]

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

ACRO SPINNING AND WEAVING MILLS LTD. LAHORE

Versus

C.I.R., SPECIAL ZONE-RTO, MULTAN

S.T.A. No.1122/LB of 2013, decided on 28th March, 2014.

Sales Tax Act (VII of 1990)---

----Ss.21(2) & 73---Sales Tax Rules, 2006, R.12---Sales Tax General Order No.35/2012, dated 30-6-2012 Cl. "N", R.32---S.R.O. No.1125(I)/2011 dated 31-12-2011, Cl. (vii)---De-registration, blacklisting and suspension of registration---Sales tax registration was suspended on the ground that requisite certificates from banks was not provided---Taxpayer contended that registration was suspended without issuing the Show-Cause Notice and order was contrary to the provisions of law; that notice dated 30-10-2013 regarding "bank certificate" was received on 31-10-2013 afternoon, which was the last working day before "Eid-holidays" for compliance on 4-11-2013, which was the first working day after "Eid-holidays"; that sales tax registration could be suspended only on the basis of criteria as specified in R.32 of Cl. "N" of Sales Tax General Order No. 35/2012 dated 30-6-2012 that none of the conditions, as contemplated in S.R.O. 1125(I)/2011 dated 31-12-2011 had ever been violated by the taxpayer and that all the transactions with the buyers were in accordance with the conditions, as enumerated in S.R.O. 1125(I)/2011 dated 31-12-2011; that buyers of the taxpayer were registered under the sales tax law as "manufacturer"/ "Importers" "exporters"/"wholesalers/service provider" and all were "Active Tax Payer" on Federal Board of Revenue web-portal, even on the date of order; and that the buyers of the taxpayer had duly declared the purchases in their monthly sales tax returns for the respective months---Validity---Provisions of S.R.O. 1125(I)/2011 dated 31-12-2011 required to charge sales tax at the rate of "five" percent, if the supply of finished product was sold to the "retailer"---Sales tax was not chargeable on the supplies of goods to the registered persons of five zero-rated sectors up to "wholesale stage" as contained in Cl. (vii) of the S.R.O. 1125(I)/2011 dated 31-12-2011---Buyers of the taxpayer were registered under the sales tax law as "manufacturer"/ "importers"/"exporter"/"wholesaler"/Services provider" and all were "Active Tax Payers" on Federal Board of Revenue web-portal, even on the date of order, which was duly evident from the copies of "online verification" provided by the taxpayer---Taxpayer as well as buyers of the taxpayer had duly declared all the transactions in their monthly sales tax returns for the respective tax periods---No mechanism was available to the taxpayer under the sales tax law, which could be helpful to foresee the status of its buyers subsequent to the transaction and to check and control the activities of the buyers---Buyers and suppliers will not be held responsible for the acts and other transaction for each others---No one could be made responsible for the act of others---Order in appeal was vacated and the order in original was annulled by the Appellate Tribunal.

2004 PTD 868; 2011 PTD 2090 and Writ Petition No.17185 of 2013 ref.

2011 PTD 1883 rel.

S. Zafar Shah FCA along with M. Aurangzeb for Appellants.

Ms. Ghazala Hameed Razi D.R. for Respondent.

Date of hearing: 18th March, 2014.

2015 P T D (Trib.) 434

[Inland Revenue Appellate Tribunal]

Before Muhammad Pervez Alam, Accountant Member and Javid Iqbal, Judicial Member

I.T.A. No.113(PB) of 2013, decided on 29th August, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A), 111, 148, 153(1) & 168(3)---Amendment of assessment--Limitation---Tax year 2007---Difference in closing stock and opening stock was added back as income from other sources and adjustment of tax deducted under Ss.148 & 153(1) of the Income Tax Ordinance, 2001 was treated as not allowable under S.168(3) of the Income Tax Ordinance, 2001---Taxpayer contended that in term of subsection (2) of S.122 of the Income Tax Ordinance, 2001, amendment could be made till 20-9-2012 within five years as the return was filed for the tax year 2007 as on 29-9-2007---Taxation Officer rejected the plea of the taxpayer for the reason that subsection (2) of S.122 of the Income Tax Ordinance, 2001 was amended through Finance Act, 2009 and the assessment could not be amended after 29-9-2012---Validity---Section 122(5A) of the Income Tax Ordinance, 2001 was inserted by the Finance Act 2009 and being substantive in nature was applicable to tax year 2010 and onward and not to tax year 2007---Limitation was to be reckoned from the date of filing of return or issuance of assessment order under S.120 of the Income Tax Ordinance, 2001 by the Commissioner---Taxpayer had filed return on 29-9-2007 from which, it emanated that deemed assessment order was passed on 29-9-2007 and it could be reopened under S.122(4) of the Income Tax Ordinance, 2001 by 28-9-2012 i.e. within five years from the date of filing of return or issuance of deemed assessment order; whereas the Taxation Officer had passed the amended order on 17-1-2013 which was hit by limitation and was liable to cancellation---Tax deducted under Ss.148(1) & 153(1) of the Income Tax Ordinance, 2001 was final liability under S.169(2)(e) of the Income Tax Ordinance, 2001---No credit of the said deduction should be allowed if in future taxpayer claimed any refund with respect of the said deduction as it fell under the Presumptive Tax Regime---Departmental appeal was rejected by the Appellate Tribunal.

1963 PTD 33 SC ref.

2013 PTD (Trib.) 1169 rel.

Haroon Masood, D.R. for Appellant.

Shahid Jan for Respondent.

Date of hearing: 8th July, 2013.

2015 P T D (Trib.) 452

[Inland Revenue Appellate Tribunal]

Before Ch.Anwaar ul Haq, Judicial Member

Messrs PROGRESSIVE LEARNING (PVT.) LTD., FAISALABAD

Versus

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

I.T.As. Nos. 1297/LB and 1298/LB of 2012, decided on 14th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S. 39---Income from other sources---Compensation on delayed refund---Taxation of---Taxpayer contended that First Appellate Authority was not justified to observe that compensation on delayed refund was of revenue nature and was assessable under S.39 of the Income Tax Ordinance, 2001; and that outstanding refunds were balance sheet items appearing on assets side and compensation received from the department on delayed payment of refund was capital receipt and not taxable; and additions made under Cl.(cc) of subsection (1) of S.39 of the Income Tax Ordinance, 2001 was not applicable for the tax years 2009 and 2010 as the said clause was inserted through Finance Act, 2012---Revenue contended that compensation on account of delayed refund was not capital receipt instead the same was revenue receipt and constituted income of the taxpayer liable to be included in the taxpayer's income---Validity---Compensation paid by the department on the delayed payment of refund to the taxpayer was just like the interest or mark-up which was paid to compensate a person for raising inflation/interest and such compensation was in the revenue nature and liable to be assessed under the amended provisions of S.39 of the Income Tax Ordinance, 2001---Since Cl.(cc) of subsection (1) of S.39 of the Income Tax Ordinance, 2001 was inserted in the Income Tax Ordinance, 2001 through Finance Act, 2012, being charging provision the same was not applicable retrospectively to the tax years 2009 and 2010---Assessing authority was not justified to charge tax under the said provision of law for the tax years 2009 and 2010---Appeals of the taxpayer were accepted on legal premises for both the years and orders passed by the authorities below were vacated by the Appellate Tribunal.

1978 PTD 328 and 2006 PTD 2456 ref.

Farooq Ijaz, I.T.P. for Appellant.

Ms. Shabana Aziz, D.R. for Respondent.

Date of hearing: 14th March, 2014.

2015 P T D (Trib.) 478

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs GHULAM RASOOL AND CO. (PVT.) LTD. LAHORE

Versus

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, LAHORE

I.T.A No.234/LB of 2013, decided on 23rd April, 2013.

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

----Ss.161, 205 & 153---Failure to pay tax collected or deducted---Opportunity of being heard---Confrontation through specific notice for the charge of tax---Principles of natural justice required that Taxation Officer, before creating tax liability under Ss.161/205 of the Income Tax Ordinance, 2001, should have confronted the taxpayer through specific notice for the charge of tax---Departmental officers, while holding a taxpayer as assessed in default, forget that S.161 of the Income Tax Ordinance, 2001 was not a charging section, it was not meant for the levy of tax on any kind of income rather S.153 of the Income Tax Ordinance, 2001 or other withholding sections were additional burden on taxpayers to deduct tax on the payments made to different persons who never wilfully allow to deduct the tax---Reasonable opportunity of being heard be given to the withholding agents to explain/justify the reasons, if any, for non-deduction of tax.

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

----S.161---Failure to pay tax collected or deducted---After filing of details/documents by the taxpayer (withholding agent) if there was any shortcoming and the Taxation Officer intended to charge tax under S.161 of the Income Tax Ordinance, 2001, specific notice be issued to the taxpayer informing him the reasons/basis for the charge of tax under S.161 of the Income Tax Ordinance, 2001---Taxation Officers unilaterally and whimsically, without confronting the taxpayers by making them easy prey charge tax under S.161 of the Income Tax Ordinance, 2001, which was not fair and justified and could no longer be allowed to continue---Such practice be avoided and provisions of S.161 of the Income Tax Ordinance, 2001 without properly and adequately confronting the taxpayer should not be made a source of revenue generation.

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

----S.161---Failure to pay tax collected or deducted---Non-attendance of office on last date of hearing---Ex-parte assessment without issuance of Show-Cause Notice---Validity---Since mandatory requirement of issuance of Show-Cause Notice before charge of tax had not been fulfilled, proceedings/superstructure built thereupon was illegal---Taxpayer regularly attended the proceedings and for one reason or the other, adjournments were sought which were granted---On last date of hearing when the taxpayer did not attend the office, this was solitary default on its part and there was no justification for the ex-parte charge of tax under S.161 of the Income Tax Ordinance, 2001---Facts lead to the conclusions that conditions, for the issuance of Show-Cause Notice before charge of tax had not been fulfilled that condition of provision of reasonable opportunity of being heard had not been given and that illegalities committed were fatal for the order which were not curable---Mandatory requirements having not been fulfilled, orders passed by the authorities below were cancelled and appeal of the taxpayer was accepted by the Appellate Tribunal.

PLD 1992 SC 723; PLD 1971 SC 124; 2012 PTD 964 and 2007 SCMR 307 rel.

1987 PTD 1914 (Trib.); 1998 PTD 973 (Trib.); 2005 PTD 234 (Trib.); 2011 PTD 321 (Trib.) and 2012 PTD (Trib.) 122 ref.

(d) Income Tax---

----Show-Cause Notice---Whether, issuance of Show-Cause Notice was provided in the law or not, must be issued so that taxpayer had at least knowledge of the intended treatment---When proper/specific final Show-Cause Notice was issued, burden shifted upon the taxpayer to defend its case against the charges framed by the Taxation Officer.

(2011) 104 Tax (sic) rel.

S. Zafar Shah (FCA) and Aurang Zeb Tahir for Appellant.

Ms. Fozia Fakher for Respondent.

Date of hearing: 5th April, 2013.

2015 P T D (Trib.) 487

[Inland Revenue Appellate Tribunal]

Before Javid Iqbal, Judicial Member and Muhammad Pervez Alam, Accountant Member

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

Versus

SAID MAHMOOD, PROP. HARIS ENTERPRISES, PESHAWAR

I.T.As. Nos.280(PB) to 283(PB) of 2013, decided on 25th March, 2014.

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

----Second Sched: Part-I, Cl.126F, Ss. 170(4), 122(5A), 128(5) & 120(1)(b)---FBR Circular No.14 of 2011 dated 6-10-2011---FBR's clarification letter C.No.476224 dated 16-6-2013---Exemptions---Tax years 2010 and 2011---Cement supplies---Exemption was claimed by the taxpayer with a view that business had been carried out in Peshawar, which was the most affected area prescribed under Cl.126F of the Part-I of the Second Schedule to the Income Tax Ordinance, 2001 and filed application for issuance of refund---Revenue contended that cement supplies were not exempt under Cl.126F of the Part-I of the Second Schedule to the Income Tax Ordinance, 2001 and secondly in case of commission receipts the tax deducted at the rate of 10% of the total commission was final tax liability---Taxpayer contended that in such like situation in cases of presumptive income, in numerous cases giving exemption under Cl.126F presumptive income, refunds had already been issued but department was reluctant to amend the order under the relevant provision of law as had been amended in the case of present taxpayer---Validity---Taxpayer was earning its income from the sale of cement, while as per Cl.126F supply of cement was excluded from provision of Cl.126F of the Second Schedule to the Income Tax Ordinance, 2001---Legally tax deducted at the rate of 10% of the commission was final tax liability and it fell under the Presumptive Tax Regime---On identical issue granting exemption to presumptive income by the authority below, the ATIR had made its own interpretation placing reliance on the judgment of the Supreme Court holding that "profit and gains" as used in Cl.126F were relevant only to the "head business income" and not to any other class of income as specified in S.11 of the Income Tax Ordinance, 2001---If income under all heads were covered under the "profit and gains" then what was the need to prescribe five heads of income---Appellate Tribunal observed that there was rational behind it---For each head there was separate provision of taxation and expense were prescribed, presumptive income which was also called "deemed income" did not fall under any head of income as specified in S.11 of the Income Tax Ordinance, 2001---If all incomes were related to "profit and gains" then why the salaried person had been charged to tax while the other categories were exempted by Federal Board of Revenue and thereafter retracted from its earlier clarification---In case of presumptive income for which filing of statements under S.115(4) of the Income Tax Ordinance, 2001 had been described while in case of normal income, return was to be filed under S.114 of the Income Tax Ordinance, 2001---After insertion of Cl.126F to the Second Schedule to the Income Tax Ordinance, 2001, law had not been amended---Persons falling under presumptive tax regime were still required to file the statement under S.115(4) of the Income Tax Ordinance, 2001, in cases falling under the other heads of income requirement of law was to file the normal return under S.114 of the Income Tax Ordinance, 2001---Federal Board of Revenue was not authorized to interpret the law---When the principle was laid down and the words "profit and gains" had been interpreted by the Supreme Court, Federal Board of Revenue was supposed to know said factum, and there was no need to give clarification---First Appellate Authority had committed grave mistake by holding that taxpayer's income was exempt from the tax under the garb of Cl.126F to the Second Schedule to the Income Tax Ordinance, 2001---Taxpayer was earning its income from the commission, the tax deducted at 1/10 of the commission was the final liability and fell under presumptive income, which was not exempt under Cl.126F to the Second Schedule to the Income Tax Ordinance, 2001---Order of First Appellate Authority was totally illegal and was in deviation to the judgment of Appellate Tribunal and that of Supreme Court---Order of First Appellate Authority was vacated by the Appellate Tribunal and that of passed by the Additional Commissioner under S.122(5A) of the Income Tax Ordinance, 2001 and order passed under S.170(4) of the Income Tax Ordinance, 2001 stood restored.

Messrs Inter Construct (Pvt.) Ltd. Peshawar v. RTO, Peshawar I.T.A. No.157(PB) of 2012; Messrs RTO v. Messrs Shah Zaman (Pvt.) Ltd. Peshawar I.T.A. No.81 (PB) of 2012; RTO v. Messrs Ashraf Match (Pvt.) Ltd. Peshawar I.T.A. No.3 (PB) of 2013; 2013 PTD 486 and Messrs Micro Tech Industries (Pvt.) Ltd. v. FBR Compaint No.674/LHR/IT/(567)/1176/2010 ref.

102 Tax 69 rel.

(b) Income Tax---

----Judgment of Federal Tax Ombudsman was not binding on Appellate Tribunal---Appellate Tribunal was competent to interpret the law, and on any point of law Reference was made to the High Court for advice.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope.

2013 PTD 484 rel.

Nawab Khan, D.R. for Appellant.

Ghulam Haroon Jally for Respondent.

Date of hearing: 25th March, 2014.

2015 P T D (Trib.) 520

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sikander Aslam, Accountant Member

Messrs SHAHBAZ CHEMICALS (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE, R.T.O.

I.T.A. No.310/LB of 2013, decided on 31st March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.214C, 177(10) & 121(1)(d)---Sales Tax Act (VII of 1990), S.72B---Federal Excise Act (VII of 2005), Ss. 42B & 46(5)---Federal Board of Revenue Act (IV of 2007), S.8---Federal Board of Revenue Rules, 2007, R.3---Selection for audit by the Board---Composite audit---Taxpayer contended that "composite audit" was being held pursuant to the computer ballot which meant an audit of both Income Tax and Sales Tax affairs, which could not be combined; that it was only the Federal Excise Act, 2005 which recognized the concept of a 'composite audit' under S.46(5) of the Federal Excise Act, 2005; thus, selection of case by the Federal Board of Revenue was illegal and void ab initio; and that superstructure built thereon in the shape of passing of an assessment order as well as appellate order automatically fell to the ground---Validity---Appeal was accepted and the orders of authorities below were vacated, as the Federal Board of Revenue had made a combined selection under one ballot in terms of S.214-C of the Income Tax Ordinance, 2001 read with S.72B of the Sales Tax Act, 1990 and 42B of the Federal Excise Act, 2005---Appeal having been decided purely on legal grounds, Appellate Tribunal did not dilate upon the other grounds.

Ikram-ul-Haq, ITP for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 28th February, 2014.

2015 P T D (Trib.) 558

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs ABDULLAH PLASTIC

Versus

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

M.A. (Stay) No.1305/LB of 2014 in S.T.A. No.590/LB of 2014, decided on 11th June, 2014.

Sales Tax Act (VII of 1990)---

----S. 48(1)(d)---Sales Tax Rules, 2006, R.72(1)---Recovery of arrears of tax---Application for grant of stay against disputed tax demand---Taxpayer contended that department was pressing hard for recovery of outstanding tax demand during pendency of appeal before the Appellate Tribunal and referred to the remarks of Deputy Commissioner Inland Revenue that "under the provisions of S.48(1)d) of the Sales Tax Act, 1990 read with R.72(1) of the Sales Tax Rules, 2006"; no notice under S.48(1)(d) of the Sales Tax Act, 1990 had been issued to the registered person; and principles of natural justice required that opportunity was given to the registered person to defend against unilateral adverse action intended to be taken against them; and no Show Cause Notice was issued---Validity---Admittedly appeal of the taxpayer assailing the treatment given by authorities below was pending adjudication before the Appellate Tribunal---Copies of the notices issued to the taxpayer transpired that the issuance of notice under S.48 of the Sales Tax Act, 1990 was obviously for the purposes of effecting recovery---Said notice placed an embargo on the taxpayer to seal its business premises---Stay was granted for a period of 30 days or till the decision of main appeal, whichever was earlier---Sealing order was palpably illegal and void, passed without lawful authority and of no legal effect---Department was directed to restrained from taking coercive measures against the registered person.

2000 PTD 1798 rel.

Muhammad Imran Rashid for Appellant.

Sajjad Tasleem, D.R. for Respondent.

Date of hearing: 11th June, 2014.

2015 P T D (Trib.) 566

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member

RIAZ AHMAD

Versus

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

I.T.A. No.1690/LB of 2012, decided on 17th April, 2014.

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

----Ss.111 (1)(b) & 122(1)---Unexplained income or assets---Source of investment, foreign remittances, sale of jewelry; and hand remittance/agricultural income---Assessing authority had found that taxpayer had made investment in purchase of property out of un-explainable sources, and amended the deemed assessment under S.122(1) of the Income Tax Ordinance, 2001 and made addition under S.111(1)(b) of the Income Tax Ordinance, 2001---Validity---Taxpayer failed to bring on record relevant documentary evidences at any stage i.e. ownership of agricultural land, payment of agricultural tax etc., to substantiate his claim that he earned some kind of agricultural income---Similarly, under the law, there was no concept of allowing credit of cash/hand remittance---First Appellate Authority had rightly confirmed the addition---Issue of availability of sources through sale of gold jewellery was remanded for verification---Assessing authority was directed to made fresh inquiry by summoning the jeweller and the taxpayer be allowed to cross examine him---Issue of availability of sources through sale of jewellery was remanded for de novo decision and order of First Appellate Authority in this behalf was vacated while rest of the order of First Appellate Authority being in accordance with law was maintained by the Appellate Tribunal.

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

----Ss.111(1)(b) & 122(1)---Unexplained income or assets---Taxpayer contended that assessing authority was not justified to make addition under S.111(1)(b) of the Income Tax Ordinance, 2001 in the tax year 2005 when the notice for discovery was issued on 24-11-2010 i.e. in the tax year 2011; and addition required to be made in the tax year immediately preceding the financial year in which it was discovered; and amendment made in S.111(2) of the Income Tax Ordinance, 2001 through Finance Act, 2010, could not be given retrospective effect---Validity---Assessing authority had rightly made the addition in the tax year 2005 as the property was purchased on 6-6-2005---Assessment was completed on 16-6-2011, and first notice was issued on 24-11-2010, when the relevant law i.e. S.111(2) of the Income Tax Ordinance, 2001 was changed by substitution of the words "immediately preceding the financial year" with the words "to which such amount relates" through Finance Act, 2010---Since the law as it existed on the relevant date of initiation of proceedings and completion of assessment stood changed and the said changes made in law shall prevail and shall be applicable---Addition had rightly been made in the tax year 2005.

2012 PTD (Trib.) 1978 and 2011 PTD (Trib.) 168 Irrelevant.

Shahid Hussain for Appellant.

Ms. Shabana Aziz, D.R. for Respondent.

Date of hearing: 17th April, 2014.

2015 P T D (Trib.) 589

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sajjad Haider Khan, Accountant Member

MUHAMMAD IRFAN BUTT

versus

C.I.R., R.T.O., SARGODHA

I.T.As Nos. 851/IB and 992/IB of 2012, decided on 20th June, 2013.

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

----Ss. 122(2), 174(3), 111(4)(b) & 120---Income Tax Rules, 2002, R.29(4)---Constitution of Pakistan, Art. 189---Finance Act (XVI of 2010), Ss.1(3) & 8(37)(77)---Amendment of assessment---Limitation---Tax year 2006---Taxpayer contended that income tax return was filed on 30-9-2006 which was taken to be assessed in terms of S.120(1) of the Income Tax Ordinance, 2001; that at the time of filing of return, the limitation for amending the assessment was provided by the statute as five years (before amendment in subsection (4) of S.122 of the Income Tax Ordinance, 2001); that assessment could only be amended up to 29-6-2011 but in the present case, assessment order had been recorded on 29-6-2012, which was absolutely time barred being passed after the time limitation of five years; and that the same was barred by time in view of Ss.122(2), 174(3) and 111(4)(b) of the Income Tax Ordinance, 2001 and R.29(4) of the Income Tax Rules, 2002 (relevant to tax year 2006)---Validity---Return had been filed on 30-9-2006 which was to be deemed to be assessment order issued to the taxpayer by the Commissioner on that date i.e. 30-9-2006, the day return was furnished under S.120(1) of the Income Tax Ordinance, 2001 and the limitation period of five years for amendment of assessment started running from that date i.e. 30-9-2006 and terminal end was fixed at 29-9-2011 in terms of subsection (2) of S.122 of the Income Tax Ordinance, 2001, relevant to tax year 2006 could not be interrupted because the substituted section contained nothing which could extend period which had already commenced to run many years earlier according to fixed measure of time---Action under Ss.122 & 111(1) of the Income Tax Ordinance, 2001 by the Taxation Officer was barred by time and the taxpayer was clothed with the vested rights which could not be impaired or waived off---Invoking of S.122 of the Income Tax Ordinance, 2001 for the tax year 2006 by the Taxation Officer was barred by time and the subsequent proceedings, order dated 29-6-2012 and addition made under S.111(1)(b) of the Income Tax Ordinance, 2001 and order of First Appellate Authority dated 17-10-2012 was void ab initio, illegal and without lawful authority---Appeal filed by the taxpayer was allowed by the Appellate Tribunal and cross appeal filed by the department had become infructuous and was rejected.

Nagina Silk Mills, Lyalpur v. Income Tax Officer Lyalpur PLD 1963 SC 322; CIT v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 PTD 1392; Saeed Ahmad v. The State PLD 1964 SC 266; 2005 PTD 259; 2008 PTD (Trib.) 1146 and (1982) 138 ITR 462 rel.

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

----S.122 (2)---Amendment of assessment---Limitation---Bare reading of subsection (2) of S.122 of the Income Tax Ordinance, 2001 (pre and post amendment) revealed that the limitation period of five years remained unchanged and only beginning of the limitation had been changed from the date of issuance of order to end of financial year relevant to the issuance of such order.

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

----S.120---"Assessment order"---Limitation---In terms of S.120(1) of the Income Tax Ordinance, 2001 return filed by the taxpayer was taken for all purposes of the Income Tax Ordinance, 2001 to be an "assessment order" issued by the Commissioner to the taxpayer on the day the return was furnished---Limitation period was reckoned and computed with reference to the day the return was furnished.

(d) Income Tax---

----Amendment of assessment---Limitation---Principles.

PLD 1963 SC 322 fol.

(e) Income Tax---

----Amendment of assessment---Limitation---Extension of period---Principles.

2009 PTD 1392 fol.

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

----Ss.122(2), 174(3) & 111(4)(b)---Amendment of assessment---Limitation---Amendments in the provisions of law viz. Ss.122(2), 174(3) & 111(4)(b), Income Tax Ordinance, 2001 substantive in nature and not mere matter of procedure---Examination of subsection (2) of Ss.122, 174(3) & 111(4)(b) of the Income Tax Ordinance, 2001 revealed that said sections dealt with limitation period and the right was accrued to the taxpayer at the start of limitation period and after the afflux of certain period of time specified therein his assessment could not be opened or amended---Addition under S.111 of the Income Tax Ordinance, 2001 could not be made and prescribed record under S.174 of the Income Tax Ordinance, 2001 and R.29 of the Income Tax Rules, 2002 would not be called---Amendments in said provisions affect the accrued rights and were substantive in nature and not mere matter of procedure and had not been given retrospective effect by the Legislature.

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

----Ss.122(2), 174(3) & 111(4)(b)---Amendment of assessment---Old rights shall be governed by old procedure and new rights shall be governed by the substituted section dealing with the new procedure---Sections 122(2), 174(3) & 111(4)(b) of the Income Tax Ordinance, 2001 had the potential of adding to the tax liability of the taxpayer, therefore, could not be applied retrospectively unless clear words had been used by the Legislature for retrospective effect.

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

----S. 122(2)---Income Tax Rules, 2002, R.29 (4)---Amendment of assessment---Limitation---Subsection (2) of S.122 of the Income Tax Ordinance, 2001 substituted by Finance Act, 2009 was enforceable from 1st day of July, 2009 and applicable to the deemed order issued or passed on and after that date and not applicable to the deemed order already passed before the substitution of said subsection and could not effect the limitation period which had already started many years earlier and terminal end was fixed at that time---No express word of Legislature was found in the substituted section for giving retrospective application to the said provision---Word "shall" had been used in the said substituted section which conveys the intention of the Legislature that it was prospective---Preamble and subsection (3) of S.1 of the Finance Act, 2009 also showed that the amendment brought in the Income Tax Ordinance, 2001 were enforceable from July 01, 2009 and financial proposals of the Federal Government were for the year beginning on July 01, 2009---Under R.29(4) of the Income Tax Rules, 2002 the taxpayer still had been given the right to retain books of accounts prescribed under Chapter VII of the Income Tax Rules, 2002 for a period of five years after the end of the tax year to which they relate---Calling of record for the tax year 2006 from the taxpayer after the expiration of limitation period of five years on 29-6-2011 was also barred by time---After the lapse of limitation period of five years on 29-6-2011 the taxpayer had been clothed with a vested statutory right of non-retaining and furnishing such records before the tax authorities---Right so accrued could not be taken away or even waived off by the affected party i.e. the taxpayer.

(1982) 138 ITR 462 rel.

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

----Ss.237 & 174(1)---Power to make rules---Rules prescribed by the Federal Board of Revenue in exercise of powers vested under S.237 read with S.174(1) of the Income Tax Ordinance, 2001 had a statutory force and be read as the part of the statute which conferred the power of its enactment and where right was claimed on the basis of such rules then the rules could be dispensed with.

PLD 1961 SC 105; 2003 YLR 1555; 2010 PTD 2302 and 1986 SCMR 1917 rel.

(j) Interpretation of statutes---

----Fiscal statute---where two provisions were dealing with the situation simultaneously, one section imposing higher burden than the other, then the provision imposing lower burden shall be applicable.

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

----Preamble---Scheme of Income Tax Ordinance, 2001---Under scheme of the Income Tax Ordinance, 2001 applicable amendments were supplied to the taxpayer in advance at the start of tax year usually effective on 1st day of July so that they could arrange their affairs accordingly and could make proper provisions for tax liability---Under the repealed Ordinance of 1979 applicable amendments were made available to the taxpayer after the close of the income year and that mischief had been suppressed in the new scheme---In accordance with the object and purpose of the new scheme of the Income Tax Ordinance, 2001 amendment brought by the Finance Acts from time to time should be given prospective effect to advance the remedy and suppress the mischief---Income Tax Ordinance, 2001 was a fiscal statute and whenever the Legislature intended to give retrospective effect to any amendment same was expressly provided therein.

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

----Ss.113 & 153---Minimum tax on the income of certain persons---Amendments made in Ss.113, 153 and First Schedule were given retrospective effect to amendments which were inconsistent with the object of the scheme of the Act and practice of the Legislature.

Muhammad Naeem Aziz for Appellant (in I.T.A. No.851/IB of 2012).

Ihsanullah Khan, D.R. for Respondent (in I.T.A. No.851/IB of 2012).

Ihsanullah Khan, D.R. for Appellant (in I.T.A. No.992/IB of 2012).

Muhammad Naeem Aziz for Respondent (in I.T.A. No.992/IB of 2012).

Date of hearing: 20th June, 2013.

2015 P T D (Trib.) 626

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member

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

versus

ABDUL RAUF ARIF, NAROWAL

I.T.A. No.1439/LB of 2012, decided on 27th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b) & 121---Unexplained income or assets---Purchase of shop---Payment was made to seller of property in foreign currency out of foreign currency account---Revenue contented that taxpayer failed to produce encashment certificate of foreign remittances received through banking channel and First Appellate Authority was not justified to entertain verbal contention that payment was made in US Dollars whereas according to registered purchase deed, payment was made in Pak rupees and cheque number or date had been mentioned; that cheque produced was for US Dollars 58508 and there was an entry of cash withdrawn; that if said amount was converted into Pak rupees, that would come to about Rs.3.6 million, whereas property in question was purchased for Rs.2.00 million as per registered purchase deed; and that taxpayer failed to explain that property was purchased out of explainable sources available with him---Taxpayer contended that he had sent foreign remittances from Saudi Arabia out of its salaries directly to the bank account; and at the time of purchase of property US $ 103147 were available in his account; and withdraw US $ 58508 and converted into Pak rupees from the open market and out of that amount he purchased the property; and since he had sources of amount credited in his bank account, the provisions of subsection (1) of S.111 of the Income Tax Ordinance, 2001 would not attract; and provisions of subsection (4) of S.111 of the Income Tax Ordinance, 2001 provided that any amount of foreign exchange remitted from outside Pakistan through normal banking channels that was encashed into pak rupees by a scheduled bank and a certificate from such bank was produced to that effect, was not applicable in the case of the taxpayer since he had otherwise explainable sources of investment---Validity---Taxpayer had duly produced the necessary documentation regarding maintenance of foreign currency account and depositing the foreign currency in the said account from abroad through foreign remittances---Copies of cheques and bank statements were also produced---At the relevant time when the taxpayer purchased the property in question, the taxpayer had sufficient amount in his Foreign Currency account to make invest for purchase of property---Provisions of subsection (4) of S.111 of the Income Tax Ordinance, 2001 were not attracted in the present case as the taxpayer had explainable sources to make investment---Availability of sources was satisfactorily proved by the taxpayer through documentary evidence---First Appellate Authority had rightly deleted the addition made under S.111(1)(b) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was maintained and appeal of the department was dismissed by the Appellate Tribunal.

Ms. Shabana Aziz, D.R. for Appellant.

M. Yasir Abdul Khaliq, for Respondent.

Date of hearing: 27th March, 2014.

2015 P T D (Trib.) 654

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Sajjad Ali, Accountant Member

I.T.As. Nos.1071/LB and 1337/LB of 2012, decided on 28th January, 2014.

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

----Ss. 161, 205 & 120(1)---Failure to pay tax collected or deducted---"Opportunity of being heard"---Once the First Appellate Authority had categorically recorded that "heavens would not have fallen had the final opportunity on the issue of merits/facts of the case had been provided to the taxpayer and that nothing could be taxed whimsically and arbitrarily but only on definite information", said Authority was under obligation to quash the whole order instead of allowing partial relief on certain issues and to maintain the order.

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

----Ss. 161, 205, 149(1), 153(1), 158 & 120(1)---Failure to pay tax collected or deducted---Accrual basis accounting---Deduction of tax at the time of making actual payment---Contention of the department that taxpayer/company was maintaining accounts on accrual basis and obligation to deduct tax arose only when expenses were recorded and became payable, was patently illegal and was contrary to the provision contained in Ss.149(1), 153(1) & 158 of the Income Tax Ordinance, 2001, which explicitly contemplate that tax was required to be deducted at the time of making actual payment---Finding of First Appellate Authority and contention of the department were wholly misconceived and initiating of proceedings under S.161 of the Income Tax Ordinance, 2001 was outcome of wrong legal presumption and not tenable in the eyes of law.

2009 PTD 538 rel.

2002 SCMR 122; 1971 SCMR 681 and PLD 1971 SC 124 ref.

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

----Ss. 161, 205, 149, 153(1)(a)(b) & 120(1)---Failure to pay tax collected or deducted---Levy of tax on consolidated figure without identifying payment, time of payment, amount of tax---Validity---Levy of tax on the allegation of non-deduction of tax under S.149 of the Income Tax Ordinance, 2001 at the flat rate of 10% on the total aggregate salary and wages of all employees for whole of the tax year and on the allegation of non-deduction of tax under S.153(1)(a)(b) of the Income Tax Ordinance, 2001 on the consolidated figure of the expenses and purchases for whole of the year reported in the audited accounts on accrual basis and matching basis without any power of Best Judgment Assessment and identifying payment, time of payment, amount of tax was coram non judice and nullity.

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

----Ss. 161/205, 177, 120 & 122C---Failure to pay tax collected or deducted---Invoking of S.161 of the Income Tax Ordinance, 2001 without audit under S.177 of the Income Tax Ordinance, 2001---Validity---Composite reading of Ss.161, 177, 120 & 122C of the Income Tax Ordinance, 2001 clearly revealed that these sections were interconnected---Direct invoking of S.161 of the Income Tax Ordinance, 2001 without audit under S.177 of the Income Tax Ordinance, 2001 constituted fishing and roving inquiry and had the effect of increasing the taxable income assessed under S.120 of the Income Tax Ordinance, 2001, being violation of over-riding effect of S.120(1) and (1A) of the Income Tax Ordinance, 2001 and action under Ss.161/205 of the Income Tax Ordinance, 2001 was not sustainable---Proceedings initiated under Ss.161/205 of the Income Tax Ordinance, 2001 and consequential orders based thereupon were void ab initio and suffered from various legal, procedural and factual irregularities---Order of Taxation Officer was vacated and annulled by the Appellate Tribunal.

2002 SCMR 122; 1971 SCMR 681; PLD 1971 SC 124 and 2008 SCMR 240 ref.

2012 PTD 122 (Trib.); 2009 PTD 538; PLD 1993 SC 473 and PLD 2003 SC 979 rel.

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

----Ss. 161 & 205---Failure to pay tax collected or deducted---Parameters for initiating proceedings under S.161 of the Income Tax Ordinance, 2001---Certain parameters were required to be brought on record by the Taxing Authority for holding the taxpayer as "taxpayer in default"---Appellate Tribunal had determined such parameters in a case reported as 2012 PTD (Trib) 122 for initiating proceedings and passing of order under Ss.161/205 of the Income Tax Ordinance, 2001.

2012 PTD (Trib.) 122; 2004 PTD 880 and 2008 PTD 787 rel.

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

----Ss. 161 & 205---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 118---Failure to pay tax collected or deducted---Section 161 of the Income Tax Ordinance, 2001 was a charging section and for its invocation no audit, inquiry or investigation was necessary but there was no room for any intendment, presumption and inference in interpretation of application of penal provision---Burden of proof was on the department which assert the default in view of Arts. 117 & 118 of the Qanun-e-Shahadat, 1984---Benefit of doubt, ambiguity or alternative interpretation was right of the taxpayer.

1973 SCMR 14 and 1977 SCMR 371 rel.

2002 PTD 1 distinguished.

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

----Ss. 161, 153, 236A & 236C---Failure to pay tax collected or deducted---Purchase of land---Advances from customers---Levy of tax under S.161 of the Income Tax Ordinance, 2001 on the purchase of land and in respect of advances received from customer was out of the scope of S.153 of the Income Tax Ordinance, 2001 as the purchase of land did not fall within the definition of "goods" and taxpayer was also not required to deduct tax at the time of receipt of advance from customers and had been correctly deleted by the First Appellate Authority---Immovable property was subject to collection of tax under independent Ss.236A & 236C of the Income Tax Ordinance, 2001 at the time of sale by the registration/Public authorities and not applicable to the taxpayer.

1999 PTD 4028; 2008 PTD 1401; 2005 PTD 974 and 2004 PTD 422 rel.

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

----Ss.205 & 161---Default surcharge---Levy of default surcharge without identifying date of deduction and corresponding date of deposit---Validity---Levy of default surcharge without identifying date of deduction and corresponding date of deposit could not be held justified---In the absence of terminal end and without determination of the default period the levy of default surcharge was not possible as both opening deductible event and terminal end were missing---Levy of default surcharge on hypothetical basis and without establishing wilful default on the part of taxpayer was illegal and nullity in the eye of law.

1992 PTD 342; 2006 SCMR 626 and PLD 1991 SC 693 rel.

Ghazala Hameed, D.R. for Appellant.

Muhammad Mansha FCA for Respondent.

Date of hearing: 28th January, 2014.

2015 P T D (Trib.) 663

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs SAQIB STAR QUALITY PRINTERS, FAISALABAD

versus

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

S.T.A. No.525/LB of 2013, decided on 12th May, 2014.

Sales Tax Act (VII of 1990)---

----Ss.11(3), 11(2), 7, 8(1)(ca), 21(3), 23, 33, 34 & 73---Assessment of Tax---Taxpayer contended that S.11(2) of the Sales Tax Act, 1990 would apply only where any person had not paid the tax due on supplies made by him and S.11(3) of the Sales Tax Act, 1990 could be invoked in case of his collusion with the tax officials or due to a deliberate act; that since Show-Cause Notice issued was completely silent with regard to collusion or deliberate act, the very acquiring of jurisdiction was fatal and void ab-initio; that goods were procured under the coverage or proper sales tax invoices issued in terms of S.23 of the Sales Tax Act, 1990 duly incorporated in supplier's sales registers and summary statements and the suppliers had duly discharged their sales tax liabilities under S.7 of the Sales Tax Act, 1990 in their monthly sales tax returns, the transactions were not hit by the mischief of S.8(1)(ca) of the Sales Tax Act, 1990 as High Court had declared Cl. (ca) of subsection (1) of S.8 of the Sales Tax Act, 1990 as ultra virus of the Constitution; that provisions of S.73 of the Sales Tax Act, 1990 for payments through banking channel had duly been complied with, the refund of input tax against invoices of such suspended or blacklisted person could not be denied and even could not be recovered after insertion of subsection (3) of S.21 of the Sales Tax Act, 1990 wherein it had been categorically provided that input tax shall be allowed if payments were made through banking channel irrespective of the fact that the suppliers units were either blacklisted or their registration had been suspended; and that purchases pertained to the period when suppliers were not blacklisted and subsequent inclusion in the list of suspended unit could not be operated retrospectively---Validity---No notice under S.11(3) of the Sales Tax Act, 1990 alleging collusion or deliberate act on the part of taxpayer had been issued, the very assumption of jurisdiction was illegal and had no lawful authority---Since the very initiation of proceedings was illegal the whole superstructure had no lawful authority and the action of the authorities below was not sustainable in the eyes of law---Other contentions of the taxpayer were legally valid particularly when the First Appellate Authority had accepted the contention of the taxpayer regarding compliance of S.73 of the Sales Tax Act, 1990 and High Court had declared Cl.(ca) of subsection (1) of S.8 of the Sales Tax Act, 1990 as ultra vires of the Constitution---Charge of sales tax upheld by the First Appellate Authority was not sustainable and merits deletion---Show Cause Notice as well as the order of Adjudication Officer was vacated and the impugned order was annulled by the Appellate Tribunal.

2007 PTD 2265; Writ Petition No.3515 of 2012; (2014) 109 Tax 313; 2011 PTD (Trib.) 2679, 2009 PTD (Trib.) 2074 and 2008 SCMR 492 ref.

Messrs Wajahat Textile, Faisalabad v. The C.I.R. S.T.A. No.99/LB of 2014 rel.

M. Imran Rashid for Appellant.

Taimoor Kamal Malik, D.R. for Respondent.

Date of hearing: 12th May, 2014.

2015 P T D(Trib.) 678

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Majid Qureshi, Accountant Member

Mst. FARZANA SHAFIQUE, SAHIWAL

versus

C.I.R., ZONE, SAHIWAL

I.T.A. No.447/LB of 2014, decided on 7th April, 204.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5)(i)---Amendment of assessment---Limitation---Taxpayer contended that original assessment was made on 30-9-2007 while notice under S.122(1) of the Income Tax Ordinance, 2001 was issued on 5-11-2012; that assessment framed under S.122 of the Income Tax Ordinance, 2001 was not maintainable being framed after lapse of statutory limitation as envisaged by subsection (2) of S.122 of the Income Tax Ordinance, 2001; and that Assessing Officer was bound to amend the assessment on or before 30-9-2012 under the law---Validity---Admittedly, deemed assessment was completed on 30-9-2007 while notice under S.122(1) read with S.122(5) & (9) of the Income Tax Ordinance, 2001 was issued on 5-11-2012---Assessing Officer was bound to amend the deemed assessment on or before 30-9-2012 which he failed to do---Even otherwise the proceedings for amending deemed assessment was also initiated by issuing show-cause notice on 5-11-2012 which was also after the prescribed time limit---Amended assessment order was time barred and was not maintainable in the eye of law---Order passed by the First Appellate Authority was vacated by the Appellate Tribunal and amended assessment order dated 30-06-2013 was cancelled.

2013 PTD (Trib.) 1169 rel.

Niaz Ahmad Khan for Appellant.

Mrs. Zahida Sarfraz, D.R. for Respondent.

Date of hearing: 7th April, 2014.

2015 P T D (Trib.) 729

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson

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

versus

Maj. Gen (R) SHUJJAT HUSSAIN

I.T.A. No.916/IB of 2013, decided on 18th February, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A), 102, 11(5) & 1(2)---Amendment of assessment---Claim of tax rebate @ 75% as full time teacher/researcher---Matter was re-opened on the ground that taxpayer had also deriving income from private medical practice from Nursing Home, and was not entitled for rebate of full time teacher/researcher; and assessment was amended being erroneous and prejudicial to the interest of revenue---Validity---Taxpayer was teaching in the University situated in Azad Jammu and Kashmir (AJK) wherein Income Tax Ordinance, 2001 did not apply as it was clearly mentioned in subsection (2) of S.1 of the Income Tax Ordinance, 2001---As the territory of Azad Jammu and Kashmir was a distinct and separate tax jurisdiction, the Income Tax Ordinance, 2001 was not applicable and the tax affairs of the State of Azad Jammu and Kashmir were governed through Azad Jammu and Kashmir Council Board of Revenue---Even otherwise taxpayer was never confronted by way of issuance of Show-Cause Notice---Further, residential status of the taxpayer was that of a "resident person", the income of the resident person under S.11(5) of the Income Tax Ordinance, 2001 to be taken for taxation shall be Pakistan source income/foreign source income---Pakistan source income was from private practice and foreign source income from salary earned in Azad Jammu and Kashmir and the question of tax credit of foreign source salary income shall be dealt under S.102 of the Income Tax Ordinance, 2001 which was very clear even if a single rupee tax had been paid to authorities of foreign land as tax from salary then no question of further taxability from salary had to be asked and it shall be taken that resident person had discharged the duty of tax from foreign source salary income---Taxation Officer without issuing any Show-Cause Notice had rejected the version of the taxpayer with the observation that taxpayer was not a full time teacher/ researcher as he was doing private practice and working as Chief Executive and Dean; and also observed that he was not entitled for rebate due to the reason that University was situated in Azad Jammu and Kashmir but he had not considered the relevant S.102 of the Income Tax Ordinance, 2001 in this respect; and no such charge as adjudged in the adjudicating order was primarily levelled in Show-Cause Notice which rendered the amended order null and void in the eyes of law---Charge not framed in Show-Cause Notice could not be adjudged through an adjudication order---Appellate Tribunal upheld the order of First Appellate Authority and dismissed the departmental appeal.

PLD 1997 SC 582 and PLD 1998 Lah. 474 ref.

Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1844; GST 2002 CL 210 and 2004 PTD 1449 rel.

Tahir Khan, D.R. for Appellant.

Ch. Naeem-ul-Haq and Imran-ul-Haq, ITP for Respondent.

Date of hearing: 18th February, 2014.

2015 P T D (Trib.) 779

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs ENGINEERS ASSOCIATED PRECAST (PVT.) LTD., LAHORE

versus

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

S.T.A. No.487/LB of 2013, decided on 18th September, 2014.

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

----Ss. 7, 11, 33, 36, 46 & 73---S.R.O. 555(I)/1996, dated 1-7-1996---Constitution of Pakistan, Art.4---Unauthorized input tax---Adjustment along with recovery of additional surcharge and penalty---Deputy Commissioner/Adjudicating Authority, issued a show-cause notice to appellant company asking to explain the unauthorized claim of Input Sales Tax amounting to Rs.4,653,699---Adjudicating Authority thereafter confirmed unauthorized input sales tax adjustment along with recovery of additional surcharge and imposition of penalty under Ss.33, 34 of Sales Tax Act, 1990---Commissioner/Appellate Authority vide impugned order upheld order passed by Adjudicating Authority, while reducing the imposition of penalty from 100% to 25%---Validity--Case involved adjustment of Rs.4,653,699, which was beyond the pecuniary jurisdiction of Adjudicating Authority as laid down in S.R.O. No.555(I)/1996 dated 1-7-1996---Show-cause notice issued by Adjudicating Authority was not tenable, in circumstances---Thing required by law to be done in particular manner, must be done in that manner, or not to be done at all under Art.4 of the Constitution---Show-cause notice issued to appellant, was without jurisdiction---Impugned assessment order and order in appeal, were held to be void---Appellant could not be subjected to default surcharge or penalty in view of S.R.O. 555(I)/1996 relating to amnesty scheme---Penalty and surcharge levied by the department, were deleted, in circumstances.

Messrs Zamindara Paper Mills (Pvt.) Ltd. Lahore v. CIR (Legal Division), RTO Lahore 2013 PTD (Trib.) 537; Messrs Central Power Generation Company Ltd. Guudu, District Kashmor v. CIR Zone-I, RTO Lahore 2013 PTD (Trib.) 1001; Messrs Malik Enterprises, Rawalpindi v. Commissioner Inland Revenue (Appeals)-Islamabad 2013 PTD 1189; Islam Engineers (Pvt.) Ltd. Lahore v. The Commissioner Inland-Revenue Zone VIII, RTO-II, Lahore S.T.A. No. 126/LB/2012; Messrs Chenab Board, Faisalabad v. CIR(A) RTO, Faisalabad 2013 PTD (Trib.) 316; Messrs EN EM Enterprises v. Additional Collector of Sales Tax and Central Excise, (Adjudication), Lahore 2011 PTD (Trib.) 619; Messrs Interloop (Pvt.) Ltd., Faisalabad v. Collector of Sales Tax (R.T.O.), Faisalabad 2011 PTD (Trib.) 2086; Collectorate Central Excise, Karachi v. Syed Manzoor Hussain 2006 PTD 219 Messrs Flying Board and Paper Products Ltd., Lahore v. Collector, Sales Tax, Lahore 2011 PTD (Trib.)1943; Messrs Aluminum Processing Industrial International (Pvt.) Ltd. v. Pakistan through Chairman Central Board of Revenue Islamabad and 2 others 2011 PTD 2128; Collector of Customs, Model Customs Collectorate of PACCS, Karachi v. Messrs Kapron Overseas Supplies Co. (Pvt.) Ltd., Karachi 2010 PTD 465; Superior Textile Mills Ltd. v Federation of Pakistan 2000 PTD 399; 2012 PTR 47 (Trib.) and 2004 PTD 1893; Messrs Kashmir Edible Oils Ltd., Lahore v. Secretary Revenue Division Islamabad 2002 PTD 1805; 1997 SCMR 209; Messrs Deluxe Packages (Pvt.) Ltd., Karachi v. The CIR, Ad-II, RTO, Karachi 2013 PTD (Trib.) 892; Messrs Usman Fabrics Faisalabad v. Collector of Sales Tax, Faisalabad 2010 PTD (Trib.) 1631; The CIR, Zone-III, RTO, Faisalabad v. Messrs Kamal Fabrics, Faisalabad 2012 PTD (Trib.) 453; Silver Cotton Mills Ltd. v. Commissioner of Sales Tax, (West) Karachi 1984 PTD 216; Messrs M. Ahmad and Co. v. Deputy Collector 2014 PTD (Trib.) 558; 2005 SCMR 492 and Messrs Sh. Wahid-Ud-Din Industries (Pvt.) Ltd. v. Additional Collector Sales Tax II and another 2006 PTD 336 ref.

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

----Ss. 2(37), 46 & 73---Tax fraud---Inadmissible transactions---Submission of record including statement by appellant showed that substantial part of its sales tax was less than Rs.50000, which was outside the scope of S.73 of Sales Tax Act, 1990---Department had not explained as to how appellant had knowingly conspired with the suppliers of the goods, rendering same to be covered by the definition of 'tax fraud'.

Hussain Ahmed Sherazi and Namdar Subhan for Appellant.

Muhammad Bilal Malik, D.R. for Respondent.

Date of hearing: 18th September, 2014.

2015 P T D (Trib.) 804

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Muhammad Majid Qureshi, Accountant Member

Messrs WASEEM SHARIF INDUSTRIES (PVT.) LTD.

versus

COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICE, ISLAMABAD

I.T.A. No.185/IB of 2013, decided on 4th September, 2013.

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

----Ss.21(c), 122(5) & Second Sched: Part-I, Cl.126F---Deductions not allowed---Taxpayer contended that expenses claimed under the heads 'travelling and conveyance, communication, selling expenses and others' were not the subject matter of S.21(c) of the Income Tax Ordinance, 2001 and as such the Officer of Inland Revenue could not make disallowance under these heads by invoking the said provision; that expenses claimed under the head 'rent, rates and taxes' was the aggregate of token tax paid on vehicle used for loading by the taxpayer/company, fee paid to SECP and rent of building; that all such payments were verifiable and could not be justifiably disallowed; that similarly, salaries and wages paid to different employees were below the taxable limit in each individual case; and that Director's salary claimed under the head 'Directors Fee" was also below taxable limit in the case of each Director; and that there was no justification even to disallow such expenses---Validity---Expenses claimed under the heads travelling and conveyance, communication, selling expense and others, could not be disallowed with reference to provisions of S.21(c) of the Income Tax Ordinance, 2001 as they did not find any mention in the said provision---For the purpose of making such disallowances, reference to S.21(c) of the Income Tax Ordinance, 2001 was irrelevant as well as illegal---Question of withholding tax from payments made under the heads 'rent, rates and taxes', salaries and wages and Directors' fee, did not arise because all the payments were not only below the threshold but in the case of 'rent, rates and taxes' substantial payments were also made to the Government Departments---Had the Assessing Officer bothered to go deeper into the record relating to the such expenses, he would have comprehended the reasons of non-deduction of tax by the taxpayer company---Further, after examination of details and information submitted by the taxpayer, no notice under S.122(5) of the Income Tax Ordinance, 2001 confronting the taxpayer with defects, if any, in the details and information was issued although issuance of such notice was mandatory---Appellate Tribunal directed to delete all such disallowances made by the Officer of Inland Revenue and upheld by the First Appellate Authority.

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

----Second Sched: Part-I, Cl. 126F---Exemptions---Profits and gains---Only those companies which earn 'profits and gains' were entitled to exemption under Cl. 126F of Part-I of the Second Schedule to the Income Tax Ordinance, 2001.

Tahir Razzaque Khan, FCA for Appellant.

Zia Ullah Khan, Deputy Commissioner for Respondent.

Date of hearing: 4th September, 2013.

2015 P T D (Trib.) 871

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Riaz Accountant Member

Messrs ISLAMABAD ELECTRIC SUPPLY COMPANY LTD.

versus

C.I.R., R.T.O., ISLAMABAD

S.T.A. No.274/IB of 2013, decided on 7th January 2014.

Sales Tax Act (VII of 1990)---

----Ss.45B(1), 33, 34 & 36(1)---Appeal---Limitation---Service of the order---Urgent Mail Service was a valid service as the same was equivalent to a courier service---Taxpayer contended that prior to obtaining certified copy of the order, no order was ever served; that as per record of the LTU, the original order was served through UMS and service of order through such a way was totally illegal and not acceptable in the eyes of law as such rejection of appeal on time limitation was illegal; that dismissal of appeal without giving specific hearing was highly unjustified and illegal; that Order-in-Original was passed when the stay against the show-cause notice which was later on turned into the Order-in-Original, was issued by the High Court; that Officer of Inland Revenue had failed to report to High Court during the course of stay proceedings that the show-cause notice had already turned into the Order-in-Original; that such attitude of the department confirmed that the Order-in-Original did not exist on 11-9-2013, when the stay order was passed by the High Court---Validity---Order-in-Original was admittedly passed on 3-9-2012 and served upon the taxpayer through Urgent Mail Service on 12-9-2012, whereas the appeal before the First Appellate Authority was filed on 19-8-2013, which was grossly time barred---Taxpaeyr was required to file appeal before First Appellate Authority within 30 days of the receipt of order which the company had failed to do so---Urgent Mail Service was a valid service as the same was equivalent to a courier service which had been duly initiated by the recipient---On the face of Order-in-Original provided by the taxpayer before the First Appellate Authority it also bore the initials and date of receipt of order as 12-9-2012 by some official of the company, which showed that order was served upon the taxpayer on 12-9-2012---Such fact had not been denied during hearing of appeal---Admittedly, no application was moved before the First Appellate Authority for the purpose of condonation of delay---Limitation created a right in favour of the other side and if the appeal or proceedings were time barred it became the duty of the person who had approached the court at least to submit an application or make an explanation but admittedly no such effort was made knowing well by the taxpayer that the appeal was barred by time---Record showed that no violation of the stay order was made by the department as the Order-in-Original was passed well before the stay order of the High Court---First Appellate Authority had rightly declined relief to the taxpayer and appeal was dismissed by the Appellate Tribunal.

Syed Tariq Jamil, FCA for Appellant.

Saeed Ahmad Zaidi, LA and Shafqat Mahmood, D.R. for Respondents.

Date of hearing: 18th December, 2013.

2015 P T D (Trib.) 882

[Inland Revenue Appellate Tribunal]

Before Muhammad Anwar Goraya, Accountant Member

I.T.A. No.524/KB of 2013, decided on 30th May, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 & 177---Amendment of assessment---Revenue contended that First Appellate Authority erred in cancelling the order passed under S.122(1) of the Income Tax Ordinance, 2001 on the basis of decision of High Court which had already been rescinded by the Supreme Court and further erred in holding that the selection of case for audit as unconstitutional, illegal and without lawful authority when the Zonal Commissioner Inland Revenue had the inherent powers under S.177 of the Income Tax Ordinance, 2001 to proceed the case for audit as had been held by the High Court---Validity---First Appellate Authority had discussed the matter at length regarding the selection of case for audit under S.177 of the Income Tax Ordinance, 2001 in view of directions given in the judgment of High Court---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeal filed by the department was dismissed.

Writ Petition No.393 of 2012; Civil Appeals Nos.1032 to 1082 of 2012 and Writ Petition No.4203 of 2013 ref.

2012 PTD 1815 and 2013 PTD 1552 rel.

Muhammad Umar Farooq for Applicant.

Muhammad Mehtab Khan for Respondents.

Date of hearing: 30th May, 2014.

2015 P T D (Trib.) 906

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir, Accountant Member

I.T.A. No.154/LB of 2014, decided on 16th April, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S. 111---Unexplained income or assets---Difference of liability recorded by the taxpayer in the books of accounts and communicated by the bank---Addition---Validity---Assessing Officer failed to identify the nature of investment or valuable article before making huge addition in the hands of taxpayer company---Law on the issue was very much clear to the effect that where a person had made any investment or was the owner of any money or valuable article and the person offered no explanation about the nature and source of the investment, valuable article, or the explanation offered by the person was not, in the Commissioner's opinion, satisfactory, value of the investment/ article, shall be included in the person's income chargeable to tax under the head "Income from other sources" to the extent it was not adequately explained---Assessing Officer intentionally ignored the basic fact which went to the roots of the case and wrongly invoked the provisions of S.111(1)(b) of the Income Tax Ordinance, 2001---Assessing Officer had arbitrarily and contrary to the provisions of law, ignored the facts and completed the assessment blindly---Order of First Appellate Authority was reasoned one since he had decided the case purely in view of documentary evidence provided by the taxpayer not only before the Assessing Officer but also in appeal proceedings which was also duly cross examined in the presence of Assessing Officer who was the author of the order---First Appellate Authority was amply justified in deleting the additions under S.111 of the Income Tax Ordinance, 2001---Order of First Appellate Authority was maintained by the Appellate Tribunal.

Sajjad Tasleem, D.R. for the Appellant.

Waheed Shahzad Butt for Respondent.

Date of hearing: 16th April, 2014.

2015 P T D (Trib.) 919

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

Messrs NOON TEXTILE MILLS LTD., BHALWAL

versus

C.I.R., R.T.O., SARGODHA

M.A. (AG) No.43/LB and S.T.A. No.482/LB of 2014, decided on 26th November, 2014.

(a) Appellate Tribunal Inland Revenue Rules, 2010---

----R. 10---Permission to take additional grounds in appeal, application for---Registered person/appellant had sought permission to take additional grounds, which according to him would go to the root of the case---Rule 10 of Appellate Tribunal Inland Revenue Rules, 2010, was self explanatory without any ambiguity therein---Rule 10 provided that every memorandum of appeal should consist of specific grounds, without any narration or argument---Application, in the present case, revealed that argumentative additional grounds had been taken therein, which being in violation of R.10, were not entertainable---Application rejected, in circumstances.

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

----Ss. 3, 4(c), 8, 11, 23, 33(5), 34, 46 & 73---Notification No. S.R.O. 1125(I)/2011 dated 31-12-2011---Recovery of sales tax along with default surcharge and penalty on allegation of certain irregularities---Issuance of show-cause notice---Report of the "CREST", revealed that the registered person/appellant, had shown supplies from the unregistered, non-filer, non-active and blacklisted registered person---On the basis of said irregularity, adjudicating proceedings were initiated by way of issuance of show-cause notice to appellant---Adjudicating Officer, had adjudged liability against appellant vide order-in-original to pay amount of sales tax along with default surcharges and penalty---Appeal filed by appellant against order-in-original, was dismissed by Appellate Authority---Appellant assailed impugned orders, mainly on the grounds, that allegations levelled therein were baseless and frivolous, as goods in question were supplied under coverage of proper zero-rated invoices issued under S.23 of Sales Tax Act, 1990, duly incorporated in summary statements; that payments against alleged transaction had also been received through Banking Channel as provided under S.73 of Sales Tax Act, 1990 and that show-cause notice for recovery of sales tax prior to July 2013, merely based on discrepancies pointed out by "CREST" was illegal and unlawful---Validity---Appellant had rightly assailed that "the CREST", despite its inception in the Sales Tax Rules, 2006, and also in negative provisions of S.8(1)(caa) of the Sales Tax Act, 1990 was found missing in charging provisions of S.3 of Sales Tax Act, 1990 or in any notification issued thereunder, without which its scope could not be extended to sales vis-à-vis output---Notification No. S.R.O. 1125(I)/2011 dated 31-12-2011, not applicable retrospectively, could not evolve liability of sales tax for earlier period of August, September and October-2011---Nothing was on record to contradict, that payments in respect of alleged transaction had not been received through Banking Channel under S.73 of Sales Tax Act, 1990; and that alleged buyers had not subsequently been blacklisted; and were not found operative at the time of transaction---Any past liability of output tax, could not be created against the appellant upon subsequent inclusion of his buyers in that very list of blacklisted persons---Appellant was engaged in manufacture of yarn, necessarily falling in textile and textile articles thereof subject to zero percent sales tax under Notification No.S.R.O. 1125(I)/2011 dated 31-12-2011; and its supply could not be impeded with sales tax, except in case it was made to unregistered person---Notified goods like yarn useable as industrial input in textile sector, squarely falling in five major zero-rated sectors, chargeable at zero per cent, as no other rate of sales tax was given in condition (vii) of said notification---Sales tax on textile goods, would be charged, and levied at the rate of zero-per cent under S.4 of Sales Tax Act, 1990, providing complete ouster to standard or any other rate of sales tax specified in S.3 of Sales Tax Act, 1990---Impugned show-cause notice, as well as consequent orders of both authorities below were declared to be illegal, ab initio void and were set aside, in circumstances.

PLD 2001 SC 340 and 2005 SCMR 492 ref.

Abuzar Hussain for Applicant (in M.A. (AG) No.43/LB of 2014).

Irshad Hussain, D.R. for Respondent (in M.A. (AG) No.43/LB of 2014).

Abuzar Hussain for Applicant (in S.T.A. No.482/LB of 2014).

Irshad Hussain, D.R. for Respondent (in S.T.A. No.482/LB of 2014).

Date of hearing: 23rd October, 2014.

2015 P T D (Trib.) 931

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Muhammad Majid Qureshi, Accountant Member

Messrs NIGAR ENTERPRISES, CHAMAN CHAMBERS

versus

C.I.R. ZONE-VI, R.T.O., LAHORE

S.T.A. No.1438/LB of 2014, decided on 1st December, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7, 8, 11(2), 45-B & 46---Recovery of alleged illegal, inadmissible input tax along with default surcharge and penalty from registered person---Remand of case by Appellate Authority---Department, as per audit report, found that appellant/registered person, had claimed illegal, inadmissible input tax amounting to Rs.3,734,579---Appellant having not submitted reply to show-cause notice issued to him, Adjudicating Authority, vide ex parte order, directed the appellant to pay said amount along with default surcharge and 100% penalty---Appellate Authority, despite holding that Adjudicating Authority had decided case ex-parte in a single hearing, depriving the appellant of his properly furnishing requisite documents and explaining his stance did not decide the matter but remanded the case to Adjudicating Authority---Validity---Order passed by Appellate Authority was totally illegal and unlawful, and liable to be struck down/annuled because subsection (3) of S.45-B of Sales Tax Act, 1990, had not conferred the power to remand the case---Impugned order of remand passed by Appellate Authority, would tantamount to give another chance to the department to fill in the lacuna to improve their case---Department, had failed to prove the charge of tax fraud against appellant, Appellate Authority, erred in law in remanding the case to the Adjudicating Authority for fresh proceedings---Impugned order being not maintainable in the eye of law, was annulled.

The Commissioner Inland Revenue v. Messrs Supreme Tech International question STR No.12/2012; 2013 PTD (Trib.) 881; 2001 SCMR 1959 and 2012 PTD (Trib.) 350 ref.

S.A. Raza Naqvi for Appellant.

Khurram Ali Qadri, D.R. for Respondent.

Date of hearing: 25th November, 2014.

2015 P T D (Trib.) 954

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haq Khan, Accountant Member

Messrs PAKISTAN REFINERY LTD., KARACHI

versus

DCIR-02, LTU, KARACHI

M.A. (Rect.) No.51/KB of 2013 in S.T.A. No.37/KB of 2011, decided on 17th September, 2014.

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

----Ss. 46 & 57---Order passed by Appellate Tribunal---Application for review/rectification of such order---Power of Appellate Tribunal to rectify mistake/review---Scope---Order sought to be reviewed/rectified, was comprehensive, covering all aspects of the case, grounds/ arguments raised during the hearing---Rectification application filed by applicant/registered person, was a sort of review and not rectification---Applicant had prayed for recalling/re-hearing of order, which tantamount to reviewing/revisiting, which was beyond the scope of rectification---Tribunal, while passing original order, had applied conscious mind, and had considered the arguments of both the parties, and facts of the case at length; and dealt with elaborately and the propositions as raised, were answered and decided by the Tribunal with reasons to that effect---Applicant had raised the same factual controversies to be addressed by the Tribunal---Tribunal under provisions of S.57 of Sales Tax Act, 1990 could amend any order passed by it so as to rectify any mistake apparent on the record qualified for rectification of such mistake---Error in the order sought to be rectified, must be apparent on the face of the record---Powers of the Tribunal for rectification of mistakes, could not be extended or allowed to be stretched to authorize the Tribunal to sit in judgment as an Appellate Court against its own order, and reverse the same by finding faults, or by taking additional grounds/evidence to a conclusion in favour of the applicant---Power to review could only be exercised where the statute itself granted such power---In the absence of grant of power of review under Sales Tax Act, 1990, it was not possible for the Appellate Tribunal to review its own order---Power under S.57 of Sales Tax Act, 1990 was limited, which was not a power of revision or review, but was limited to correcting only those mistakes which were apparent flouting on the surface of the record---No justification was available to re-open the decided issues by acceding to the request of the applicant---Issue raised in the application, required detailed discussion, re-investigation and reappraisal of matter, reassessing of evidence, examination, which exercise did not fall under limited scope of rectification of mistake apparent mistake---Application being not sustainable on facts and in law, same was rejected.

CIT v. Move (Pvt.) Ltd. 2013 PTD 2040; (1990) 182 ITR 361; AIR 1970 SC 1273, (1998) 232 ITR 395; CIT v. Shadman Cotton Mills Ltd. 2008 PTD 253; National Food's case 1993 SCMR 687 = 1992 PTD 570 and Karala High Court v. Ram Bahadur Thakur Ltd., (1999) 237 ITR 217 ref.

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

----Ss. 45-B, 46 & 57---Error apparent on record---Rectification---Powers of Appellate Authorities to rectify such error---Scope---Failure by the Appellate Authority to consider an argument advanced by either party for arriving at a conclusion, was not "an error apparent on the record", though it could be an error of judgment---No scope for rectifying an "error of judgment" by invoking provisions of S.57 of Sales Tax Act, 1990.

None for Applicant.

Zulfiqar Ali Memon, D.R. for Respondent.

Date of hearing: 17th September, 2014.

2015 P T D (Trib.) 990

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Majid Qureshi, Accountant Member

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

versus

Messrs MIA CORPORATION (PVT.) LTD., ISLAMABAD

S.T.A. No.143/IB of 2011, decided on 20th May, 2014.

Sales Tax Act (VII of 1990)---

----Ss.8(B)(1), 2(17)(a), 11, 33, 34, 36 and 73---S.R.O. No.655(I)/2007 dated 29-6-2007---Adjustable input tax---Manufacturer---Commercial Importer---First Appellate Authority held that "department treated the Taxpayer as "Manufacturer" and was not allowed to adjust input tax in excess of ninety percent of the output tax while the taxpayer was a commercial importer and adjusted excessive input tax; that taxpayer only imported Air-condition units and supply the same; related parts of the units were also imported for "after sale warranty" purposes and no facility of manufacturing was available at the unit's premises; that web portal of Federal Board of Revenue confirmed that the taxpayer was registered as "Service provider/importer/exporter" and contention of the taxpayer seemed to be correct; that S.8B(1) of the Sales Tax Act, 1990 restricted input adjustments up to ninety percent of out put tax and commercial importers were excluded from it; that the demand was vacated; that as regards short payment of Special Excise Duty, the same was only payable on the goods produced or manufactured in Pakistan; that taxpayer was not registered as manufacturer nor the department had registered them as manufacturer; that in case of importer, the Special Excise Duty shall be paid at import stage; and that as the taxpayer did not fall in the category of manufacturer, the demand of Special Duty was not justified and the same was vacated"---Revenue produced a copy of certificate issued by Central Registration Office where the taxpayer's status appeared as "manufacturer/ Importer/Exporter" and, also produced a screen shot of status of application appearing on Registration Management System filed by the taxpayer which revealed that the taxpayer intended to drop its manufacturing category and department required some physical verification; that all such proved contrary to the taxpayer's stance that they were commercial importer; that further taxpayer engaged in the import of air conditioner parts such as compressor, expansion values and communication cables and also purchased locally manufactured products like PVC cables, flexible duct, strap rolls, filling gas cylinder, temperature controller, gate valve, ball valve, M. S. seamless pipes; and all such parts were obviously used in manufacturing of an air conditioner---Validity---From perusal of definition of "manufacturer" or "producer" provided in law, it was clear that the taxpayer's business activity fell in the definition of "manufacturer" ; and the taxpayer was under legal obligation to only adjust input tax to the extent of ninety percent of the output tax---Taxpayer being a "manufacturer" shall not be allowed to adjust input tax in excess of ninety percent of the output tax---Since the taxpayer contravened the provision of law, the Assessing Authority had rightly ordered recovery of sales tax along with default surcharge and penalty which was upheld by the Appellate Tribunal---As the status of the taxpayer as "manufacturer" was confirmed, he was under legal obligation to pay Special Excise Duty @ 1% of their total sales in terms of S.R.O. No.655(I)/2007 dated 29-6-2007---Order of the Assessing Authority for recovery of Special Excise Duty was maintained and order of First Appellate Authority was vacated.

Imran Shah, D.R. for Appellant.

Atif Mehmood, for Respondent.

Date of hearing: 20th May, 2014.

2015 P T D (Trib.) 1050

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar Accountant Member

Messrs FLAME TREND

versus

COMMISSIONER INLAND REVENUE (APPEAL-III), RTO, LAHORE

S.T.A. No.1135/LB of 2013, decided on 15th September, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 11(2), 25, 38, 46 & 73---Tax fraud and claim for inadmissible input tax on fake invoices---Payment of sales tax along with default surcharge and penalty---Adjudicating Authority had observed that registered person had claimed inadmissible input tax on fake invoices---Reply submitted by the registered person was found unsatisfactory, and the firm had deposited partial amount of sales tax, and submitted an undertaking for depositing the remaining amount---Adjudicating Authority passed order under Ss.11(2) & 2(37), without issuing notices under Ss.25 & 38 of Sales Tax Act, 1990, directed registered person to pay remaining amount of sales tax along with default surcharge and 100% penalty---Validity---No notice under Ss.25, 38 & 72-B of Sales Tax, was issued to registered person as per law to assume jurisdiction of the case---Once the self-assessment tax due was considered to be correct and final, any order which suffered from illegality or was without jurisdiction, deserved to be knocked out---Impugned show-cause notice being coram non judice, and without lawful authority, superstructure built on the same should fall flat---Orders of both the authorities below, being illegal and void ab initio, were cancelled, and appeal filed by registered person was accepted, in circumstances.

S.T.A. No.835/LB of 2011; 2012 PTD (Trib.) 619 and Messrs Lahore Electric Supply Company Ltd. v. Federal Board of Revenue in ICA No.79 of 2014 ref.

Muhammad Imran Rashid for Appellant.

M. Bilal Malik D.R. for Respondent.

Date of hearing: 15th September, 2014.

2015 P T D (Trib.) 1074

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs AZHAR CORPORATION (PVT.) LTD., FAISALABAD

versus

C.I.R.(A), FAISALABAD and others

S.T.A. No.1136/LB of 2014, decided on 17th September, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 11(3) [Since omitted], 33(5) & 34---Levying penalty and default surcharge---Penalty under S.33(5) of Sales Tax Act, 1990, could only be imposed in case of failure of depositing the due amount of tax, but in the present case, Appellate Authority vacated whole amount of sales tax, and nothing left payable by the appellant/taxpayer---Neither any charge of wilful default nor charge to defraud had been levelled on the appellant---Additional demand of penalty under S.33(5) of Sales Tax Act, 1990, was a tax of punitive nature and no penalty could be imposed and adjudged against taxpayer, until and unless each and every subsection of S.33 was specifically mentioned and confronted in the show-cause notice---If any penalty was imposed without confronting the relevant provisions, as contained in S.33(5) of Sales Tax Act, 1990, same would fall beyond scope and contents of show-cause notice, which would render it illegal, unlawful and void ab initio---Authority neither specified amount of penalty and default surcharge, nor the extent of percentage of penalty and default surcharge in the impugned show-cause notice---Penalty and default surcharge imposed against taxpayer, was otherwise not recoverable with the specification until and unless a lump-sum amount, or percentage thereof was confronted in the show-cause notice---Imposition of penalty and default surcharge on taxpayer, which was in utter violation of provisions of S.33(5) of Sales Tax Act, 1990, was declared to be illegal, ab initio void and set aside, in circumstances.

Messrs Nizam Impex (Pvt.) Ltd.'s case 2014 PTD 498; Messrs D.G. Khan Cement Factory Ltd.'s case 2004 SCMR 456 = 2004 PTD 1179; Messrs Pakistan Refinery Ltd.'s case GST 2006 CL 63; Messrs Bilal Textiles (Pvt.) Ltd., Faisalabad's case 2010 PTD 957 and The Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1840 ref.

Khubaib Ahmad for Appellant.

M. Bilal Malik, D.R. for Respondent.

Date of hearing: 17th September, 2014.

2015 P T D (Trib.) 1078

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Asif, Accountant Member

Messrs NEXTEK SERVICES, LAHORE

versus

C.I.R, R.T.O., Lahore

S.T.A. No.1232/LB of 2012, decided on 28th October, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(25) & 21(2)---Sales Tax Rules, 2004, R.11---Registered person---Blacklisting and suspension of registration of registered person---Registered person who could not receive show-cause notice for suspension of his registration, requested for removal of his suspension---Registered person was directed to appear before the Directorate of Intelligence and Investigation because information report was allegedly given by the Department of Intelligence for suspension due to non-appearance of registered person---Reply submitted by registered person, having been found unsatisfactory, he was blacklisted---Validity---Necessary conditions as prescribed in the notification of the procedure as required under S.21(2) of Sales Tax Act, 1990 having not been satisfied, impugned order could not be sustained, and same was vacated, in circumstances.

Ch. Usman Khalil for Appellant.

Ms. Samia Ejaz, D.R. for Respondent.

Date of hearing: 23rd October, 2014.

2015 P T D (Trib.) 1094

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs AL-HASEEB CORPORATION, FAISALABAD

versus

ADDITIONAL COLLECTOR CUSTOMS, FAISALABAD

S.T.A. No.358/LB of 2009, decided on 22nd August, 2014.

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

----Ss. 33, 34, 36 & 46---Inadmissible input adjustment, and suppression of sales---Recovery---Limitation---Assessee was alleged to have inadmissible input adjustment against purchase invoices and suppression of sales, and was served with a show-cause notice---Adjudicating Officer vide order-in-original, ordered recovery of alleged wrong adjustment, suppressed sale, along with additional tax and penalty---Validity---Impugned order, which under provisions of S.36(3) of Sales Tax Act, 1990, was to be passed within ninety days of issuance of show-cause notice, was passed after a period of more than one year, which was much beyond the limitation prescribed under the law, especially when Adjudicating Authority had not sought extention of limitation period---Order-in-original which had wrongly been passed, was vacated, in circumstances.

2004 PTD 1614; 2008 PTD (Trib.) 541; 2009 PTD (Trib.) 966; S.T.A. No.515/LB of 2012; 2011 PTD (Trib.) 2216; 2010 PTD (Trib.) 2670; 2010 PTD (Trib.) 2117; 2009 PTD (Trib.) 1263; 2008 PTD 2025 and 2008 PTD 60 ref.

(b) Administration of justice---

----Where basic action/order was without lawful authority, superstructure built on the same had to fall on the ground automatically.

Usman Ali Khan , ITP for Appellant.

Mrs. Misbah Nawaz, DR for Respondent.

Date of hearing: 22nd August, 2014.

2015 P T D (Trib.) 1112

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Muhammad Riaz Accountant Member

Messrs PESHAWAR ELECTRIC SUPPLY COMPANY, WAPDA HOUSE, PESHAWAR

versus

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

S.T.As. Nos. 96/PB, 98/PB of 2013 and 170/PB, 159/PB, 145/PB of 2011 and 8/PB of 2012, decided on 2nd June, 2014.

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

----Ss. 11, 30 [as substituted by Finance (Amendment) Ordinance (XXII of 2009)] 32, 36, 45 & 46---S.R.O. 547(I)/2008 dated 11-6-2009---Assessment of Sales Tax---Recovery of short-paid tax---Jurisdiction of Adjudicating Authority---Adjudicating Authority vide Assessment Order (Order-in-Original), found the taxpayer to be in default of sales tax in terms of Ss.11 & 36 of the Sales Tax Act, 1990 along with default surcharges under S.34 of the Sales Tax Act, 1990 and penalty equal to 5%---Taxpayer raised objection that Adjudicating Authority did not have jurisdiction to decide the matter and contended that S.30 of the Sales Tax Act, 1990 as it existed before substitution by Finance (Amendment) Ordinance, 2009, was regulated by S.R.O. 547(I)/2008 dated 11-6-2009 whereunder Sales Tax Authorities were appointed and jurisdiction was assigned to them, but after the substitution of S.30 no Notification was issued or published in the official Gazette appointing Sales Tax Authorities, and assigning them jurisdiction, which was mandatory for carrying out any proceedings---Plea of the Department that Finance Act, 2010 came into operation on 5-6-2010 was belied by S.1 of Finance Act, 2010---Order-in-original passed by Adjudicating Authority on 29-6-2010, was held to have been passed without jurisdiction, in circumstances.

Messrs Naseem Plastic House, Faisalabad v. CIR, RTO, Faisalabad 2012 PTD (Trib.) 1335; Punjab Beverages Company (Pvt.) Ltd. Faisalabad v. CIR, RTO, Faisalabad 2012 PTD (Trib.) 1094; Commissioner (Legal Division), Inland Revenue, RTO, Faisalabad v. Messrs Zahidgee Fabrics (Pvt.) Ltd. Faisalabad 2012 PTD (Trib.) 1040 and Engineer Iqbal Zafar Jhagra and another v. Federation of Pakistan and others 2013 SCMR 1337 = 2013 PTD 1491 ref.

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

----Ss. 11, 25, 36(3), 45 & 74---Order-in-original---Passing of---Limitation---Taxpayer raised objection that adjudication/assessment had not been finalized within the period stipulated in Ss.11 & 36 of the Sales Tax Act, 1990 and contended that period of limitation in a fiscal statute creating liability against a taxpayer, once expired, could not be extended---Validity---Where issue involved entailed creation of liability against a taxpayer, the period of limitation was mandatory---Extension given by FBR, having been granted after the expiry of the prescribed limitation period, was of no avail; and impugned order-in-original passed by Adjudicating Authority, was held to be void as having been passed after prescribed period of limitation.

Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax 2009 PTD 762; Commissioner of Income Tax/Wealth Tax, Legal Division Multan v. Musarrat Mumtaz Lady Dr. c/o D.H.Q. Hospital, D.G. Khan 2011 PTD 2358; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax, Gujranwala 2008 PTD 60; Ghandhara Nissan Diesel v. Collector of Customs 2007 PTD 202; Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; Pak Elektron Ltd. v. Additional Collector 2012 PTD (Trib.) 1650; Pakistan International Airlines Corporation v. Central Board of Revenue, Islamabad 1990 CLC 868; 2010 PTD 660; 2007 PTD (Trib.) 803; 2010 PTD 21; 2009 PLC 258; PLD 2008 Lah 200; PLD 2007 Pesh. 103; 2007 CLC 315; 2007 PTD 127; 2007 PTD 840; 2005 CLD 713; 2006 PTD 769 = PLD 2006 SC 209; 2002 YLR 792; 1966 PTD 40; 2008 PTD 2025; 2008 PTR 34 (S.C. Pak.); 2009 PTD 1978 (H.C.); STR No.21/2011 (H.C.); 2009 PTD 2004 (H.C); 2013 PTD (Trib.) 4; 2013 PTD (Trib.) 379; 2013 PTD (Trib.) 639 and 2013 PTD (Trib.) 834 ref.

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

----Ss. 8(1)(a), 14, 15 & 45-B---Input tax adjustment---Entitlement---Transmission and distribution losses---Allowance of---Contention of the department was that taxpayer who had not used unbilled units of electricity in the taxable supplies, was not entitled to input tax adjustment relating to unbilled units under S.8(1)(a) of Sales Tax Act, 1990; and that no provision existed in Sales Tax Act, 1990 which allowed Transmission and Distribution Losses (T & D Losses) to the electric distribution companies; that concession or facility being extended to one taxpayer, could not be denied to another taxpayer in common facts and circumstances of cases that Transmission and Distribution Losses were integral part of supply of electricity, those losses had been approved even by NEPRA; that Appellate Authority had decided the case as an independent forum; that allowing input tax adjustment relating to Transmission and Distribution Losses, was strengthen by High Court's judgment PTCL 2002 CL 115, wherein it was held that a registered person, was entitled to reclaim or deduct input tax paid, inter alia where the goods on which input tax was paid by the registered person/taxpayer, were subsequently destroyed and were not meant for use, nor were intended to be used for any purpose other than taxable supplies---Validity---Held, decision by the Appellate Authority as to admissibility of input tax relating to Transmission and Distribution Losses, was held to be in order---Appeal filed by the department was dismissed, in circumstances.

PTCL 2002 CL 23020(sic); Messrs Trade Links International, Lahore v. Collectorate of Sales Tax, Lahore 2003 PTD (Trib.) 928; The Coca Cola Export Corporation v. The Additional Collector, Lahore 2002 PTD (Trib.) 1455; Messrs Chenab Fabrics and Processing Mills Ltd. Faisalabad v. Government of Pakistan 2006 PTD 1412; 2002 PTD (Trib.) 111 and Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal Lahore PTCL 2002 CL 115 ref.

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

----Ss. 8 & 13---Electricity units supplied to PATA---Exemption, claim of---Taxpayer had shown the taxable supplies in PATA under the Column "exempt", in the sales tax return; and department disputed the admissibility of input tax relating to exempt supplies---Taxpayer, per force was obliged to show the supplies electricity in PATA under the Column "exempt" in view of the fact that such supplies had been declared as non-taxable by the courts of competent jurisdiction---Even the department, was not clear as to the placement of such supplies in the sales tax return---Simple mentioning of those supplies in PATA under the "exempt" Column, in circumstances, would not render them exempt---FBR's clarification, made such supplies as taxable; and their ultimate account as taxable supplies, was not disturbed by any lacuna in the Sales Tax Return Form---Orders of the court of competent jurisdiction, must be followed and the taxpayer should not be made to suffer on account of such orders---Contention of the taxpayer was acceded to, and the findings of Appellate Authority, were upheld, in circumstances.

2002 SCMR 134 and 1997 SCMR 209 ref.

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

----Ss. 14, 23 & 59---Tax paid on stocks acquired before registration of taxpayer---Input tax adjustment on stock---Claim for---Issue regarding input tax adjustment on stock acquired before registration, related to input tax adjustment claimed by taxpayer on stocks which were acquired by WAPDA, during the transit period between submission of sales tax returns by WAPDA on behalf of the taxpayer; and filing of return by the taxpayer itself---As for discrepancy relating to WAPDA and taxpayer, the Customs Excise and Sales Tax Appellate Tribunal, had laid down, complete principle of a subsidiary company, or a division of parent company, that same was valid and legal---Such problem usually crop up in the transition period, when accounts were being switched between different Public Sector Organizations and their subsidiaries---Taxpayer had paid for the taxable supply of said stocks---Said stocks had been used for further supply of electricity by the taxpayer, on which sales tax had been paid---WAPDA had not claimed input tax adjustment relating to said stocks---Taxpayer, was held entitled to input tax adjustment on the stocks acquired before registration---Order of Appellate Authority was upheld, in circumstances.

Haji Mehr Din v. CIT Zone-A, Lahore 2002 PTD 541; Messrs Kohinoor Textile Mills Ltd., Rawalpindi v. The Additional Collector of Customs, Sales Tax and Central Excise 2007 PTD (Trib.) 728 and Messrs Clifton and Defence Traders Welfare Association v. President, Clifton Cantonment Board PLD 2003 Kar. 495 ref.

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

----Ss. 11(2), 30, 33(5), 34, 36(1) & 70---Short payment of tax due---Recovery of short payment along with default charges and penalty---Limitation---Adjudicating Authority, on the basis of audit of account of the taxpayer, found the taxpayer in default of sales tax in terms of Ss.11 & 36 of Sales Tax Act, 1990---Adjudicating Authority, after issuance of show-cause notice to the taxpayer on 30-6-2010, ordered recovery of principal amount of sales tax, from taxpayer along with default charges and penalty---Contention of taxpayer was that impugned adjudication/assessment had not been finalized within the stipulated period of 120 days---Validity---Show-cause notice was issued to the taxpayer on 30-6-2010, and from that date prescribed period of 120 days would be over on 28-11-2010---Impugned order, which was passed on 27-11-2010, was delivered to Courier Service on 30-11-2010, which was received on 1-12-2010---Subject period of limitation of 120 days, involving creation of tax liability, was mandatory---Mere passing of an order, was not enough; and the crucial date to determine the time of judgment, was the date when order was dispatched to and received by concerned party---Department had admitted that impugned order was dispatched to the taxpayer on 30-11-2010, but had tried to take shelter behind the excuse of postal delay to seek condonation of period beyond 120 days prescribed under Ss.11 & 36 of the Sales Tax Act, 1990---Period between 27-10-2010 to 30-10-2010, had not been explained---Excuse of postal delay, at the best could commence after the receipt of the envelope containing the order by the Courier Service---Effective date to complete the period of limitation, could at the best was 30-11-2010, when the order was handed over to the Courier Company---Held, subject order had not been passed within stipulated period under Ss.11 & 36 of the Sales Tax Act, 1990.

Messrs Naseem Plastic House, Faisalabad v. CIR, RTO, Faisalabad 2012 PTD (Trib.) 1335; Punjab Beverages Company (Pvt.) Ltd. Faisalabad v. CIR, RTO, Faisalabad 2012 PTD (Trib.) 1094; Commissioner (Legal Division), Inland Revenue, RTO, Faisalabad v. Messrs Zahidgee Fabrics (Pvt.) Ltd. Faisalabad 2012 PTD (Trib.) 1040; Zamindara Paper Mills v. C.I.R. (Legal Division) R.T.O. 2013 PTD 537; Messrs Sabir Daud Exports v. Secretary, Revenue Division, Islamabad 2007 PTD 430; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax 2009 PTD 762; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd., v. The Collector of Sales Tax Gujranwala 2008 PTD 60; Messrs Siddiqui Sons Denim Mills (Pvt.) Ltd., v. Secretary, Revenue Division, Islamabad 2008 PTD 1379; Messrs Qasim Cotton Ginners v. Secretary, Revenue Division, Islamabad 2007 PTD 1317; CBR/Sales Tax Department v. Messrs Pace International, Rawalpindi PTCL 2005 CL 841; Messrs Zeenat Printing and Dyeing, Gujranwala v. The Collector of Sales Tax and Central Excise, Lahore PTCL 2010 CL.1134; Federation of Pakistan v. Messrs Ibrahim Textile Mills Ltd. 1992 SCMR 1898; Messrs Dewan Cement Ltd. v. Collector of Customs and Sales Tax and another 2009 SCMR 1126; 2010 PTD 660 and 2007 PTD (Trib.) 803 ref.

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

----Ss. 11, 36, 25(3) & 45 [Modified by Finance Act (XVI of 2010)]---S.R.O. No.555(I)/96 dated 1-7-1996 as rescinded vide S.R.O. No.594(I)/2012 dated 1-6-2012---Assessment of tax---Recovery of short levied tax---Pecuniary jurisdiction of Adjudicating Authority---Sub-mission of the taxpayer was that Assistant Commissioner/ Adjudicating Authority, had no pecuniary jurisdiction under S.R.O. No.555(I)/96 dated 1-7-1996 and that under S.R.O. No. 555(I)/96 dated 1-7-1996 Assistant Commissioner, could issue show-cause notice in a case falling under Ss.11 & 36 of the Sales Tax Act, 1990, provided that the amount of tax involved did not exceed Rs.500,000, while amount involved in the case exceeded Rs.13 billion---Validity---Section 1 of the Finance Act, 2010 mentioned the date of its coming into force as 1-7-2010---Substitution of S.25(3), and omission of S.45 of Sales Tax Act, 1990 by Finance Act, 2010, were not relevant to the impugned show-cause notice issued by Assistant Commissioner on 30-6-2010---Orders issued on the basis of a show-cause notice beyond the pecuniary limits provided in S.R.O. No.555(I)/96 dated 1-7-1996, were not fatal---Said S.R.O. was alive and operative till it was rescinded vide S.R.O. No.594(I)/2012 dated 1-6-2012, and it was operative on 30-6-2010---Show-cause notice dated 30-6-2010 was held to be beyond pecuniary jurisdiction; and all subsequent proceedings in pursuance of such an unlawful show-cause notice, were held to be void---Superstructure built on an unlawful foundation, would collapse with all of its parts.

Messrs Chenab Board Fasisalabad v. CIR (A) RTO 2013 PTD (Trib.) 316; Messrs Central Power Generation Company Ltd., Guudu, District Kashmore v. CIR Zone-I, RTO Lahore 2013 PTD 1001; Islam Engineers (Pvt.) Ltd., Lahore v. The Commissioner Inland Revenue Zone-VIII, RTO-II, Lahore S.T.A. No.126/LB/2012; CIR Zone-II, RTO, Multan v. Messrs Prime PVC Factory, Multan 2012 PTD (Trib.) 105 and Messrs Malik Enterprises, Rawalpindi v. Commissioner Inland Revenue 2013 PTD 1189 ref.

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

----Ss. 7 & 8---Determination of tax liability---Input tax adjustment relating to Transmission and Distribution Losses---Admissibility---Adjustment of input tax relating to Transmission and Distribution Losses, was admissible---Decision of Appellate Authority in that regard was ordered to be upheld.

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

----S. 2(46)---Levy of sales tax on subsidy paid by Government---Taxability of amount received as subsidy by a power distribution company had been thoroughly examined and decided in favour of the taxpayer by the Tribunal in its decisions vide S.T.A. No.874/LB/2013 and S.T.A. No.950/LB/2013 wherein it was held that sales tax was not payable on the subsidy received by the taxpayer from the Government.

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

----S. 3---Scope of tax---Claim of department was that electricity supplied by supplying company to its retired employees, (hypothetical contingent liability), could not be precluded from the scope of S.3 of Sales Tax Act, 1990---Validity---Appellate Authority had rightly held that sales tax was not payable on the advances during the relevant period; and on the same analogy any "contingent liability" shown in the financial statement in accordance with the international accounting standards, payable only at the time of winding up of the company, was outside the scope of S.3 of Sales Tax Act, 1990.

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

----S. 8(1)(b)---Customs Act (IV of 1969), First Sch., Ch. 87---S.R.O. No. 490(I)/2004 dated 12-6-2004---Adjustment of input tax---Claim for---Taxpayer claimed adjustment of input tax paid on vehicle purchased by it, on the ground that said vehicle had been used to monitor the installation and distribution of electricity on which output tax had been paid by taxpayer---Department had disputed said adjustment on the ground that such adjustment, was not tenable under S.8(1)(b) of Sales Tax Act, 1990 read with S.R.O. No.490(I)/2004 dated 12-6-2004---Validity---Held, input tax adjustment claimed on the vehicles falling in Chapter 87 of the First Schedule to the Customs Act, 1969, was not admissible.

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

----Ss. 3 & 8---Scope of sales tax---Input tax---Admissibility of---Department had alleged that taxpayer had supplied goods against consideration, but had failed to charge sales tax thereon; that input tax adjustment relatable to said goods, was not admissible---Taxpayer contended that he had not supplied said goods to any person; that Government allocated funds for various MNAs/Senators Grant Scheme relating to electrification and installation of equipment for distribution of electricity; that said expenditure was thereafter capitalized in taxpayer's books of accounts and assets permanently belonged to the taxpayer and that said goods having not been supplied to any person, charging of output tax did not arise---Department had failed to provide any proof of taxable supply of the subject goods; output tax was payable only when taxable supplies were made under S.3 of Sales Tax Act, 1990---Purchase of goods with the funds given by the Government, would not affect the nature of transaction relating to purchase of goods by the taxpayer---Sales tax could not be levied on the basis of surmises and conjectures, resultantly, input tax adjustment involved in that issue was admissible.

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

---Ss.3, 11 & 16---Failure to pay sales tax on scrap---Remand of case---Department alleged that payment of sales tax on scrap was not substantiated by record---Plea of the taxpayer was that relevant record was provided to Adjudicating Authority and also to Appellate Authority, but that record had not been examined---Authenticity of relevant record had not been rebutted by the department, which had revealed that sales tax in question had been charged and deposited in the State Exchequer on the sale of scrap---Subject record previously produced at the appellate stage, having not been examined, it would be just and fair to remand that issue to the Adjudicating Authority for examination of record and to decide the issue after hearing both the parties---Order accordingly.

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

----Ss. 3, 11 & 16---Non-payment of sales tax on FAS season charges---Remand of case---Issue related to non-payment of sales tax on FAS season charges on the ground that the taxpayer had failed to prove the withdrawal of that levy---Counsel for the taxpayer had explained that FAS season charges were determined in 2007, while the subject case related to the audit period April 2009-April 2010; that said issue cropped up due to use of electricity bill forms which were printed in bulk before the said withdrawal; and those forms contained the Column FAS season charges and that documentary evidence produced before the Adjudicating Authority and Appellate Authority had not been examined in the operative parts of their orders---Validity---Four components i.e. fixed charges; energy charges; FAS and additional surcharges had been merged in the revised tariff in 2007 and the revised tariff thereafter consisted of two parts i.e. fixed charges and variable charges---Sales tax having been charged on the revised tariff, allegation as to non-payment of sales tax on a discontinued levy was not tenable---Tribunal observed that documentary evidence relating to the issue having not been examined and analyzed at the Assessment/Appellate stage, it was, therefore, considered appropriate to remand the issue to Adjudicating Authority with the direction to examine the relevant record to decide the issue after hearing the parties---Order accordingly.

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

----Ss. 3, 11 & 16---Non-payment of sales tax on supplies to associated undertakings---Issue of non-payment of sales tax on supplies to associated undertakings related to non-payment of sales tax on supply of free electricity to employees---Submission of the taxpayer was that the relevant record proving payment of the subject sales tax was provided to Adjudicating Authority and Appellate Authority, but same had not been examined---Department contended that taxpayer had failed to provide any documentary evidence regarding payment of sales tax on supply of free electricity to its employees---Validity---Documentary evidence in the form of month-wise GST assessed against WAPDA employees, along with electricity bills showing payment of sales tax on free supply of electricity to its employees were available, but those documents had failed to attract attention of the department---Charges relating to non-payment of the subject sales tax, held, were not proved---Cross appeals filed by the department and by the taxpayer, were disposed of accordingly.

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

----Ss. 10, 11, 16, 66 & 73---Sales Tax Rules, 2006, Rr.28, 34 & 37---Claim of refund---Limitation---Taxpayer claimed refund of input tax carried forward in the sales tax return under S.10 of Sales Tax Act, 1990 and Sales Tax Rules, 2006---Taxpayer provided supporting documents as per R.28 of Sales Tax Rules 2006, and submitted complete data in accordance with law, but Adjudicating Authority rejected the refund claim of the taxpayer---Appellate Authority had decided appeal partially---Both parties filed cross-appeals against said order of the Appellate Authority---Appeal filed by department exclusively related to admissibility of input tax relating to Transmission and Distribution Losses (T & D Losses)---Input tax adjustment on 'T & D Losses' therefore had validly been claimed by the taxpayer---WAPDA's power purchase invoices fell outside the scope of utility bills---Input tax relating to utility bills of tax payer was admissible for adjustment against his output tax or refund---Supplier's sales summary was required to be checked by the Taxation Officer in the relevant return of the supplier---Said issue was referred back to the Refund Processing Officer for further scrutiny and decision of the issue after hearing both the parties---Taxpayer was entitled to adjustment of input tax relating to said supplies---Nature of abnormality of tax profile of the supplier having not been detailed in impugned order, said issue was remanded to the Refund Processing Officer for verification of tax profiles of the suppliers after providing opportunity of hearing to the taxpayer for clarification of the matter---Refund claim could not be rejected merely on assumptions and presumptions---Payment for a taxable supply could be made within 180 days of the issuance of a tax invoice, while S.66 of the Sales Tax Act, 1990 allowed period of one year for claiming refund of input tax adjustment, not claimed within the relevant tax period---Bona fide mismatch of figures relating to the invoices and payments made thereafter could exist, said issue was remanded to Refund Processing Officer to recheck the relevant documents and allow input tax adjustment to taxpayer, if delivery of goods to the taxpayer and payment under S.73 of Sales Tax Act, 1990 was proved---Cross appeals filed by the department relating to the single issue of 'T & D Losses', and appeal filed by the taxpayer, were disposed of accordingly.

2011 PTD (Trib.) 2712; Messrs D.G. Khan Cement Co. Ltd. v. CIR (Legal Division) RTO, Multan 2013 PTD (Trib.) 777 Messrs Maple Leaf Cement Factory Ltd., Lahore v. Collector of Sales Tax, Faisalabad 2013 PTD (Trib.) 1800; D.G. Khan Cement v. The Federation of Pakistan PLD 2013 Lah. 693; Messrs Mayfair Spinning Mills Limited v. Customs, Excise and Sales Tax Appellate Tribunal and 2 others PTCL 2002 CL 115; 2012 PTR 47 (Trib.); Messrs Deluxe Packages v. CIR, RTO, Karachi 2013 PTD (Trib.) 892; Messrs Pfizer Laboratories v. Federation of Pakistan PLD 1998 SC 64; Messrs Pakistan Television Corporation Ltd. Islamabad v. CIR (Appeals-II) Islamabad 2013 PTD (Trib.) 1290; Messrs Kashmir Edible Oils Ltd, Lahore v. Secretary Revenue Division Islamabad 2002 PTD 1805 and CIR v. Messrs Kamal Fabrics, Faisalabad 2012 PTD (Trib.) 619 ref.

Hussain Ahmed Sherazi for Appellant (in S.T.As. Nos.96/PB of 2013 and 170/PB of 2011).

Azhar Naeem Qarni and Haroon Khattak, D.R. for Respondents (in S.T.As. Nos.96/PB of 2013 and 170/PB of 2011).

Azhar Naeem Qarni and Haroon Khattak, D.R. for Appellant (in S.T.As. Nos.98/PB of 2013, 159/PB, 145/PB of 2011 and M.A. No.8/PB of 2012).

Hussain Ahmed Sherazi for Respondent (in S.T.As. Nos.98/PB of 2013, 159/PB, 145/PB of 2011 and M.A. No.8/PB of 2012).

Date of hearing: 2nd June, 2014.

2015 P T D (Trib.) 1165

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs I.A. TEXTILES, MONTGOMERY BAZAR, FAISALABAD

versus

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

S.T.A. No.901/LB of 2014, decided on 17th September, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 11(2) & (3) [Since omitted], (5), 33, 34 & 46---Recovery of erroneously refunded amount of sales tax---Assessee, who had received sales tax refund on the strength of invoices issued by a black listed unit, was issued show-cause notice, asking him as to why the said amount could not be recovered from him under S.11(2) of Sales Tax Act, 1990, on account of being illegal and unlawful input tax refund along with surcharge and penalty---Validity---Impugned show-cause notice; and consequent adjudication order issued under S.11(2) of Sales Tax Act, 1990, for recovery of erroneously refunded amount of Sales Tax, were illegal and ab initio void---Impugned show-cause notice, and consequent adjudication order passed under S.11(2) of Sales Tax Act, 1990, were not only illegal, void ab initio, but were without jurisdiction---Recovery of erroneously refunded amount of Sales tax, could be made under provision of S.11(3) of Sales Tax (Since omitted)---Present case was neither a case of assessment of tax on the basis of any short payment, nor of non-payment thereof, assumption of jurisdiction under S.11(2) of Sales Tax by way of issuing show-cause notice, and passing adjudication order for recovery of erroneously refunded amount of sales tax, without invoking mandatory provision of S.11(3) of Sales Tax Act, 1990 (since omitted) were illegal and without jurisdiction---Where the basic statutory notice was illegal, and without lawful authority, whole superstructure built on the same would have to fall, on the ground automatically; and whatsoever proceedings in its consequence in the shape of any adjudication, and appellate order, would also become illegal, unlawful and without jurisdiction---Present case also being that of wrong quoting of legal provisions of law had rendered all proceedings nullity in the eyes of law---Impugned show-cause notice as well as consequent orders, were declared to be illegal, ab initio void, and were set aside, in circumstances.

Messrs Maple Leaf Cement Factory and others v. The Collector, and others GST 2003 CL 72 and Messrs Caltex Oil Pakistan Ltd. v. The Collector Sales Tax and Central Excise and others 2004 PTD 480 ref.

Khubaib Ahmad for Appellant.

M. Bilal Malik, D.R. for Respondent.

Date of hearing: 17th September, 2014.

2015 P T D (Trib.) 1174

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

AMTEX LIMITED KHURRIANWALA, FAISALABAD

versus

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

S.T.A. No.769/LB of 2014, decided on 17th September, 2014.

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

----Ss. 2(14), 7 & 8---Input tax---Making input tax adjustment---Condition of physical transfer of goods---Law required no proof of physical transfer of goods from supplier to buyer as a pre-condition for making an input tax adjustment or refund.

(b) Administration of justice---

----Past and closed transaction, could not be re-opened especially when a beneficiary had no role in the irregularity committed by the other party.

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

----S. 8-A---Deposit of sales tax in national exchequer---Scope of S.8-A, Sales Tax Act, 1990---Provisions of S.8-A of Sales Tax Act, 1990, simply required that the buyer should have the prior knowledge and reasonable grounds to suspect that the supplier would not deposit the sales tax paid by him in the national exchequer---In order to attract the provisions of S.8-A of Sales Tax Act, 1990, initial burden would lay on the department to establish that the taxpayer had such prior "knowledge" and "reasonable grounds" to suspect the supplier that Sales Tax paid to him would remain unpaid and then proceed against the taxpayer.

(d) Administration of justice---

----No one would suffer for the act of another, and no body could be punished for the wrong of others.

Messrs Zahidjee Textile Mills Ltd., Faisalabad v. The Collector (Appeals), Faisalabad 2011 PTD (Trib.) 2619 ref.

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

----Ss. 3, 7, 8 & 11---Liability and obligation of taxpayer---Retrospective effect of notification, executive order and instruction---Notification, executive order and instruction, could not be given retrospective effect, if it would go to the benefit of the taxpayer, but if it was detrimental or prejudicial to the interest of a taxpayer imposing liability or obligation, same would always operate prospectively.

Messrs Army Welfare Sugar Mills Ltd., and others v. Federation of Pakistan and others 1992 SCMR 1652; Messrs Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 and Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 ref.

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

----Ss. 45, 45-A & 46---Duty of adjudicating authority and Appellate Authority---Both, adjudicating authority and the First Appellate Authority, had turned a deaf ear to the assertions and grounds made by the appellant; and had failed to take notice of the departmental illegalities; and had not given findings on the issues separately; rather in just one sentence in summary manner, which rendered their whole exercise of adjudication, illegal and ab initio void---Adjudicating authority and the first Appellate Authority were obliged to weigh conflicting evidence; and to draw their own inferences and conclusion in order to administer substantial justice---Onerous duty was on the part of Adjudicating authority and Appellate Authority to discuss all issues and dispose of what had been argued.

Khubaib Ahmad for Appellant.

M. Bilal Malik, D.R. for Respondent.

Date of hearing: 17th September, 2014.

2015 P T D (Trib.) 1186

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs FINE CRYSTOPLAST (PVT.) LTD., KOT LAKHPAT, LAHORE

versus

COMMISSIONER INLAND REVENUE, RTO, LAHORE

S.T.A. No.662/LB of 2014, decided on 16th October, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 11, 33, 34, 46 & 73---Illegal input tax adjustment---Recovery of such amount---Registered person, was charged with getting illegal input tax adjustment against fake/bogus invoices---Proceedings were initiated by issuing show-cause notice---Adjudicating Authority through order-in-original directed registered person to deposit amount of alleged input tax adjustment---Order-in-original passed by Adjudicating Authority was upheld by Appellate Authority below---Validity---Registered person, was neither involved in tax fraud nor had committed any irregularity, and compliance of S.73 of Sales Tax Act, 1990 had been adhered to and had made all payments through Banking Channels---Claim of Registered person was fully supported by documentary evidence and had produced copies of bank statements, along with verification letters, party ledger of the supplier, Sales Tax returns of buyer/supplier for the relevant period, purchase registers, bank payment challan and inward gate passes, in proof of his claim---All said documents proved that goods were purchased by registered person from the respective supplier; and payments relating thereto were made through Banking Channel in accordance with law---Impugned orders passed by authorities below being not maintainable in the eyes of law as well as facts of the case, were set aside, in circumstances.

2010 PTD (Trib) 2406; 2010 PTD (Trib.) 1631; 2011 PTD (Trib.) 633; 2011 PTD (Trib.) 773; 2011 PTD (Trib.) 866; 2004 PTD 868; 2012 PTD (Trib.) 619; 2012 PTD (Trib.) 350; 2012 PTD (Trib.) 885; PTCL 1991 SC 963(sic); PTCL 1995 CL 415; 2006 PTR 78 (S.C. Pak) and 2007 PTD (Trib.) 445 ref.

Muhammad Shabbir Sheikh for Appellant.

Mrs. Saira Bano, D.R. for Respondent.

Date of hearing: 16th October, 2014.

2015 P T D (Trib.) 1193

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Muhammad Riaz Accountant Member

Messrs DEFENCE HOUSING AUTHORITY, ISLAMABAD

versus

C.I.R., LTU, ISLAMABAD

I.T.A. No.431/IB of 2014, decided on 22nd May, 2014.

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

----S.122(5A)---Amendment of assessment---Fishing inquiries---Scope---Assessing Officer launched a fishing expedition to dig evidence by use of revisional jurisdiction under S.122(5A) of the Income Tax Ordinance, 2001---To move under S.122(5A) of the Income Tax Ordinance, 2001, the assessment should be erroneous resulting in prejudice to interest of revenue.

Glaxo Laboratories Ltd. v. Inspecting A.C. PLD 1992 SC 549 and CIT v. Nusrat Corporation 2006 PTD 2660 ref.

2013 PTD 1557 and 2010 PTD 111 rel.

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

----S. 122(5A)---Amendment of assessment---Power to make enquires---Scope---Power to make or cause to be made enquires under S.122(5A) of the Income Tax Ordinance, 2001 [as amended by Finance Act, 2012] was not retrospective and not applicable to tax year 2012---Amendment in law was not applicable retrospectively.

106 Tax 85(sic) rel.

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

----S. 122(5A)---Amendment of assessment---Un-earned development revenue---Addition---Audited accounts clearly mentioned that Assessing Officer misled himself in making addition on the basis of incorrect correlation---Fact that same represented the development charges instalments received over the years and was only recognized on percentage of completion and charging the same in one year was illegal was ignored---Assessing Officer had issued 'sine qua non' order on such count, which was illegal.

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

----S. 122(5A)---Amendment of assessment---Deferred participation fee---Addition---Assessing Officer had added to income an amount of advance fee in one year, whereas that related to the services to be provided over a period of 25 year and the same had been disclosed properly in audited financial statements---To recognize the income on cash basis in a company and recognize cost as and when incur, which certainly would give distorting results was illegal---Remanding the matter for de novo consideration by commissioner was not necessary as it required the First Appellate Authority to firstly see whether the addition made any sense under the provisions of law and only if yes, he had the right to call further information and cause inquires to arrive at any decision rather than remanding it back.

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

----Ss. 122(5A) & 88A---Amendment of assessment---Advance from JV Project---Addition---Obtaining such facility from JV Project, taxpayer was able to repay its heavy bank loans which had a burden on the income and was beneficial to the revenue---Assessing Officer added said amount without correctly understanding the transaction, detail of which had been provided in audited accounts filed along with the return---If said amount was recognized as income of the year, no benefit of tax credit could be obtained under S.88A of the Income Tax Ordinance, 2001 and would lead to absurd results---Share from income of an Association of Persons (JV) could only be recognized by the taxpayer after it was declared/offered/appropriated by the Association of Persons---Addition was illegal on this count.

(f) Constitution of Pakistan---

----Art. 25---Equality of citizens---Discrimination---Tribunal has no jurisdiction to pass discriminatory order.

Syed Tauqeer Bukhari, Syed Tanseer Bukhari and Muddassar Khalid, ACA for Appellant.

Said Munaf, D.R. for Respondent.

Date of hearing: 22nd May, 2014.

2015 P T D (Trib.) 1221

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Asif, Accountant Member

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

versus

Messrs KAMALIA SUGAR MILLS, LTD., FAISALABAD

I.T.A. No.1230/LB of 2010, decided on 30th October, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 120 & 122(5-A)---Amendment of assessment---Revenue expenditure---Determination---Scope---Assessee/company, filed Income Tax return declaring loss---Assessment made by Assessing Officer was found erroneous and prejudicial to the interest of revenue, on the ground that the mark-up claimed on borrowed capital for expansion of the plant, was capital expenditure, and could not be reduced from taxable income---Such assessment order was annulled by Appellate Authority below, and department had filed appeal before Appellate Tribunal---Contention of Departmental representative was, that as assessee company had itself declared the mark-up on the loan borrowed for expenditure in the capital account, as per audited accounts, company was not entitled to claim its direct deduction while computing the income as revenue expense---Contention was repelled, as in the audited accounts, the entries were recorded on the basis of "International Account Standards (IAS)", whereas in the income tax return, the entries were recorded in accordance with income tax law and procedure---Under International Account Standards, mark-up payable to the bank, could be capital expenditure, but under the Income Tax Law, that could be claimed as a revenue expenditure.

1989 PTD 500 rel.

Mrs. Samia Ejaz, D.R. for Appellant.

Shahid Pervez Jami for Respondent.

Date of hearing: 29th October, 2014.

2015 P T D (Trib.) 1223

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Muhammad Riaz, Accountant Member

MUHAMMAD ZEESHAN

versus

COMMISSIONER INLAND REVENUE, SBTB-UNIT, RTO, SARGODHA

I.T.A. No.815/IB of 2013, decided on 23rd January, 2014.

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

----Ss. 111(1)(b), 122(1), 122(5), 120 & 41---Punjab Agricultural Income Tax Act (I of 1997), S.4-A---Unexplained income or assets---Definite information---Agricultural income---Issuance of repeated notices for produce-books of accounts---Total of credit entries in bank relating to agriculture receipts---Addition---Validity---Taxpayer had declared net agricultural income as Rs.35,00,000 being exempt income under S.41 of the Income Tax Ordinance, 2001 along with information regarding his bank accounts---Said declared information was filed well before the initiation of proceedings under S.122 of the Income Tax Ordinance, 2001---Net agricultural income could only be arrived at after deducting expenditure, allowances and deductions from the gross receipts of the sale of agricultural produce on the same way as the net business income was arrived at after deducting expenses from the gross receipts---No column existed in the income tax return for the tax year 2001 which required the taxpayer to declare gross agricultural receipts but only a column under the heading "Exempt income/loss" was available in the return for declaring agricultural income and the taxpayer had accordingly declared net agricultural income therein---By no stretch of imagination it could be held that the net agricultural income could be arrived at without bearing any expenditure or allowances---Section 4-A of the Punjab Agricultural Income Tax Act, 1997 allowed a taxpayer to made deductions while computing net agricultural income---Assessing authority while examining the bank statement had ignored such aspect of the case and presumed that the entire credit entries in the bank statement were suppressed and were undisclosed business receipts---Assessing Authority asked the taxpayer to produce books of accounts and other supporting documents by issuing several notices---Assessing Officer had not shown any doubt with regard to the receipts from the sale of agricultural produce, but had rejected the same only on the ground that the taxpayer had failed to produce the books of accounts in that regard and bifurcation of the bank deposits relatable to agricultural receipts---Such type of treatment itself proved that the Assessing Officer had no "definite information" or any other corroborated evidence showing that the receipts were concealed business receipts instead of "exempt agricultural receipts"---First Appellate Authority had affixed the stamp on the doubt assumption and presumption of the Assessing Officer---Any information which created doubt or provided reason to suspect that the income or receipts had been concealed or suppressed did not form part of the term "definite information"---Deemed assessment was amended by presuming that the difference between the declared receipts and of total of credit entries were suppressed business receipts ignoring the fact of declared agricultural income which did not constitute 'definite information' but was a departmental opinion evolved on the basis suspicion, presumption and assumption---Taxpayer having declared agricultural income in his return of income was not legally required to declare gross agricultural receipts in his return---Notices for initiation of proceedings under S.122(5) of the Income Tax Ordinance, 2001 were void ab initio and of no legal effect---Proceedings initiated on the basis of illegal notices and superstructure constructed thereon in the shape of amended order under S.122(1)/(5) of the Income Tax Ordinance, 2001 were nullity in law---Order of First Appellate Authority was vacated and amended order passed by the Assessing Officer was annulled by the Appellate Tribunal by declaring to have been passed against the spirit of Income Tax Ordinance, 2001.

CIR v. Messrs Khan CNG and Filling Station and others 2013 PTD 884; 2012 PTD (Trib.) 1593; 2012 PTD (Trib.) 1775; 2012 PTD (Trib.) 741; 2013 PTD (Trib.) 900 and 1993 SCMR 1108 = 1993 PTD 1108 rel.

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

----S.122 (5A)---Amendment of assessment---Issuance of notice repeatedly---Legality---Assessing Officer had issued repeated Show Cause Notices based on suspicion seeking information, examination of books of accounts, wavering/dithering from one point of view to other---Such type of fishy inquiries by issuing repeated notices were disapproved by the Appellate Tribunal.

1993 SCMR 1108 = 1993 PTD 1108 rel.

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

----Ss. 122(5A) & 177---Amendment of assessment---Call for books of accounts and conducting inquiries---Validity---Additional Commissioner was not empowered under S.122 (5A) of the Income Tax Ordinance, 2001 to call for books of accounts and conduct inquiries---Power to call for accounts books of the taxpayer could be exercised only while conducting audit under S.177 of the Income Tax Ordinance, 2001.

2013 PTD (Trib.) 900 rel.

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

----Ss. 41, 114 & 122(5A)---Agricultural income---Amendment of assessment---Books of accounts---Assessing Officer required books of accounts in respect of agricultural income which was exempt income under S.41 of the Income Tax Ordinance, 2001 and taxpayer was not legally obliged to prepare books of accounts in respect of exempt agricultural income---Taxpayer had voluntarily declared agricultural income in his return of income along with his business income---If the taxpayer earned only agricultural income covered by S.41 of the Income Tax Ordinance, 2001 he was legally not required to file return of income under S.114 of the Income Tax Ordinance, 2001.

Naeem Munawar for Appellant.

Tahir Khan, D.R. for Respondent.

Date of hearing: 23rd January, 2014.

2015 P T D (Trib.) 1242

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Faheemul Haq Khan, Accountant Member

C.I.R., R.T.O. HYDERABAD

versus

Dr. MUHAMMAD AZEEM ALMANI

I.T.As. Nos.538/KB and 539/KB of 2010, decided on 31st October, 2013.

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

----S.128(5)---Procedure in appeal---Admission of new evidence---First Appellate Authority within the meaning of S.128(5) of the Income Tax Ordinance, 2001 had been authorized under law to admit new evidence if he was satisfied that appellant was prevented by sufficient cause from producing such material or evidence before the Commissioner.

2000 PTD 359 rel.

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

----S.122 (1), (4), (5)---Amendment of assessment---Confrontation of audit observations---Definite information---Officer of Inland Revenue was obliged that after formulation of the audit report audit observation/objections/charge sheet, he ought to first confront the contents of the report on all the issues to the taxpayer; secondly, after considering the explanation of the taxpayer, if he considered necessary that the same was required to be amended on the basis of definite information then he may invoke subsection (1) of S.122 of the Income Tax Ordinance, 2001 for acquiring jurisdiction to amend the order under subsection (4) read with subsection (5) of the Income Tax Ordinance, 2001 as the case may be.

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

----Ss.122(5), 122(9) & 177---Amendment of assessment---Non-confrontation of audit report to taxpayer---Effect---Order was passed under Ss.122(1), 122(5) of the Income Tax Ordinance, 2001 without confronting the taxpayer the contents of audit report/charge sheet before invoking the amending assessment order under S.122(1) read with subsections (4), (5) and Cls.(i), (ii) & (iii) of S.122(5) of the Income Tax Ordinance, 2001 or even before the issuance of notice under S.122(9) of the Income Tax Ordinance, 2001---Assessment had been framed in total ignorance of the law and in violation of the prescribed procedure and legal requirement---Officer of Inland Revenue, in total oblivion of the procedure had been made for the amended assessment under the provisions of S.122(1) of the Income Tax Ordinance, 2001 in continuation to the proceedings of audit under S.177 of the Income Tax Ordinance, 2001 without acquiring proper jurisdiction as prescribed in Ss.177(6), 122(1) & 122(5) of the Income Tax Ordinance, 2001---Fact that the order had been amended under S.122 of the Income Tax Ordinance, 2001 should be the point of favour of selecting a case for audit instead of being treated as an obstacle in the path of selection of case for audit because on the basis of amendment of an order it could be safely assumed that the return which had been converted into assessment order could not be relied upon.

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

----Ss.177, 122(5) & 122(1)---Audit---Purpose---Audit proceeding under S.177 of the Income Tax Ordinance, 2001 was only a procedure to find out some defects in the accounts and to obtain information to further enter into the jurisdiction under S.122(1) of the Income Tax Ordinance, 2001 for making an amended assessment after acquiring authority under S.122(5) of the Income Tax Ordinance, 2001 on the basis of "definite information".

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

----Ss.177 & 122(5)---Audit---Object---For all practical purposes S.177 of the Income Tax Ordinance, 2001 was a just process to reach to conclusion as to from where the Officer of Inland Revenue could further modify an already assessed income for which law had very clearly provided the provision in terms of S.122(5) of the Income Tax Ordinance, 2001.

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

----Ss.177 & 122(5)---Audit---Scope---Section 177 of the Income Tax Ordinance, 2001 did not in itself provide any power to modify assessment or re-determine the income of taxpayer; it was not a return of income which was being processed by the Officer of Inland Revenue, doing audit---Officer of Inland Revenue was dealing with a 'deemed assessment' which by process of law had acquired a sanctity---Finalized assessment could not just be modified or disturbed in continuation of the proceedings of audit under S.177 of the Income Tax Ordinance, 2001.

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

----Ss.177 & 122(5)---Audit---Process of acquiring jurisdiction---Selection of audit or even conducting of audit did not mean or include an assessment or amended assessment/alteration or modification of assessment---Selection of audit and thereafter conducting of audit proceedings was just process and audit authority before invoking provisions of S.122 of the Income Tax Ordinance, 2001 for amendment had to frame charge sheet/audit observation/audit qualification/audit report and the same ought to be communicated to the taxpayer for rebuttal and the explanation/reply/assertion/contention/objections of taxpayer must be obtained and considered before proceeding for invoking S.122 of the Income Tax Ordinance, 2001---After acquiring jurisdiction, and fulfilling all the requirements of subsections (1) and (5) of S.122 of the Income Tax Ordinance, 2001, only thereafter assessment may be amended under S.122 of the Income Tax Ordinance, 2001---Mere issuance of notice under S.122(9) of the Income Tax Ordinance, 2001 read with S.122(1) of the Income Tax Ordinance, 2001 after selection and conducting audit of the taxpayer was not complete requirement of law---Department first had to reject the objection/rebuttal of taxpayer on audit report then require to acquire jurisdiction under S.122(1) and then S.122(5) of the Income Tax Ordinance, 2001, which had not been done in the present case---Officer of Inland Revenue after selection and conducting audit ought in every case to be able to give the taxpayer all the objection/issues raised in audit against taxpayer such as to enable him to answer/explain them before invoking provisions of S.122 of the Income Tax Ordinance, 2001 and after obtaining and considering explanation of taxpayer on audit objection even if the Officer of Inland Revenue may consider necessary---Officer of Inland Revenue may amend the assessment under S.122(1), (4)/(5) of the Income Tax Ordinance, 2001 after fulfilling all requirements of law subject to definite information and fulfillment of further condition of Cl. (i), (ii) or (iii) of subsection (5) of S.122 of the Income Tax Ordinance, 2001.

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

----S.122(5)---Amendment of assessment---Definite information---Provision of subsection (5) of S.122 of the Income Tax Ordinance, 2001 allowed amendment of any assessment only when the department was in possession of definite information and not otherwise, and Officer of Inland Revenue was under legal obligation to specifically identify the nature of suppressed income and issue notice in terms of Cls.(i), (ii) and (iii) of subsection (5) of S.122 of the Income Tax Ordinance, 2001 highlighting the fact under which category taxpayer's case fell---Non-issuance of such notice clearly meant that while passing the amended assessment order, Officer of Inland Revenue was not in possession of definite information and the reason assigned for additions/disallowances while passing the amended assessment order, could not be termed as "definite information" and law had rendered the entire proceedings void ab initio, and illegal---Even otherwise simple issuance of notice under S.122(9) of the Income Tax Ordinance, 2001 just after conducting audit of the taxpayer and prior to confrontation audit report/objection/charge sheet for obtaining rebuttal/explanation by the taxpayer was not enough to further proceed in the matter for amending under S.122 of the Income Tax Ordinance, 2001 already completed under law---Before making any additions and disallowances to the assessed income under the grab of audit under S.177 of the Income Tax Ordinance, 2001 and amended assessment under Ss.122(1)/122(5) of the Income Tax Ordinance, 2001, tax department was required to acquire legal jurisdiction under the provisions of S.122(5) of the Income Tax Ordinance, 2001 which could only be done to modify or alteration or amend the already assessed income only by establishing that taxpayer's income was either under-assessed or assessed at a too low rate or subject to excessive relief or refund and to be based on "definite information"; no such finding in terms of "definite information" were on record in the present case---No grave error was noticed in deemed assessment---Department had to qualify through audit that the deemed assessment was under assessed or as the case may be in terms of S.122(5) of the Income Tax Ordinance, 2001 [subject to definite information]---Requirements of S.122(5) of the Income Tax Ordinance, 2001 were to be strictly fulfilled in letter and spirit---Initiation of assessment proceeding through notices under Ss.177 & 122(9) of the Income Tax Ordinance, 2001 was legally not justified and order was passed in consequence thereof being unlawful was not sustainable and ab initio void---Unless any "definite information" was acquired by the Officer of Inland Revenue as a result/finding of audit conducted under S.177 of the Income Tax Ordinance, 2001 and the Officer of Inland Revenue was satisfied that on the basis of "definite information" and not on the basis of "mis-information" or "doubtful information"---Further three requirements to be stretched in pursuance to "definite information" which were not cumulative or to be established together were (i) any income chargeable to tax had escaped (ii) total income had been under-assessed, or assessed at a too low rate, or had been the subject of excessive relief or refund and (iii) any amount under a head of income had been mis-classified.

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

----S.111---Unexplained income or assets---Specific and separate notice---Additions had been made without issuing specific and separate notice under S.111 of the Income Tax Ordinance, 2001 which was sine qua non and no addition under S.111 of the Income Tax Ordinance, 2001 could be made without independent, specific and separate notice under S.111 of the Income Tax Ordinance, 2001 with specification of relevant clauses and subsection of S.111 of the Income Tax Ordinance, 2001---Such additions made in the present case were deleted by the Appellate Tribunal.

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

----S.111---Unexplained income or assets---No separate notice was issued to the effect that as to under which clause addition was to be made---Validity---Officer of Inland Revenue had not given independent separate notice or disclosed his mind under separate notice as to under which clause he had made addition---Each clause had different eventuality---Addition made under S.111 (1) of the Income Tax Ordinance, 2001 without following the legal requirement of said clauses was illegal, unwarranted and uncalled for, ab-initio void---Specific, separate and independent mandatory notice under S.111(1) of the Income Tax Ordinance, 2001 specifying and invoking a relevant subsection and particular clauses be issued prior to making addition---No specific, separate and independent mandatory notice under S.111(1) of the Income Tax Ordinance, 2001 had been issued and served upon the taxpayer---Addition made was unjust, unfair, illegal and liable to be annulled.

2012 PTD (Trib.) 312 and 2012 PTD (Trib.) 790 rel.

(k) Administration of justice---

----If the law had prescribed method for doing of a thing in a particular manner, such provision of law was to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted.

2006 SCMR 129 and Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 rel.

(l) Interpretation of statutes---

----Where the requirement to be fulfilled was given by the statute to be mandatory, failure to comply with such a mandatory requirement of the statute would render the act void ab initio as being an act performed in disregard of the provisions of the statute---Any further action taken on the basis of such a void order would also be vitiated and the defect at the initial stage would be incurable by a hearing at a subsequent stage.

2006 SCMR 129 and Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 rel.

(m) Income tax---

----Addition---No addition was legally sustainable if mandatory requirement for the same had not been complied with.

1993 PTD 392 rel.

(n) Administration of justice---

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

2005 MLD 1329 and Khalid Saeed v. Shamin Rizvi 2003 SCMR 1505 rel.

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

----Ss.177(6) & 122(1)---Audit---Amendment of assessment---Amendment under S.122 (1) of the Income Tax Ordinance, 2001 without fulfilling legal requirement of S.177(6) of the Income Tax Ordinance, 2001 was without jurisdiction or in excess of jurisdiction.

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

----S.122---Amendment of assessment---"Subject to this section"---Connotation---Provision of S.122 of the Income Tax Ordinance, 2001 which start with the language "subject to this section" restricts all further proceedings for amendment of an assessment which means that it could only be amended if they were covered by the provisions of this section---Amendment of assessment for which this section had been prescribed could not be made if the requirements and qualifications prescribed in this section were not completed before making such amendment of the assessment.

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

----Ss.177 & 122(5)---Audit---Amendment of assessment---Once audit proceedings were initiated under S.177 of the Income Tax Ordinance, 2001 and amendment was required to be made under S.122(5) of the Income Tax Ordinance, 2001, assumption of jurisdiction under S.122(5) of the Income Tax Ordinance, 2001 was a condition precedent for amendment.

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

----Ss. 122(5), 120 & 111---Amendment of assessment---Definite information---Officer of Inland Revenue failed to fulfil pre-requisite requirement under S.122(5) of the Income Tax Ordinance, 2001 and had not brought on record "definite information"---What to speak of "definite information", Cls. (i), (ii) and (iii) of subsection (5) of S.122 of the Income Tax Ordinance, 2001 further stipulate three conditions for issuing of a notice that is any income chargeable to tax has escaped assessment; or total income has been under-assessed, or assessed at a too low rate, or has been the subject of excessive relief or refund; or any amount under a head of income has been misclassified---If "deemed assessment" selected for audit and conducted audit under S.177 of the Income Tax Ordinance, 2001, it may be amended by invoking jurisdiction under S.122(1) of the Income Tax Ordinance, 2001 subject to fulfillment of conditions as envisaged under sub-section (6) of S.177 of the Income Tax Ordinance, 2001 and after fulfilling the pre-requisite requirement of "definite information" under subsection (5) of S.122 of the Income Tax Ordinance, 2001 and subject to execution of conditions of Cls. (i), (ii) & (iii) of S.122(5) of the Income Tax Ordinance, 2001---In the present case, no proper and valid notice was issued under S.122(5) of the Income Tax Ordinance, 2001 and no notice was issued as to under which clause the Officer of Inland Revenue had amended order under S.122(5) of the Income Tax Ordinance, 2001 and what was the specific "definite information"; no specific, separate and independent valid notice under S.111 of the Income Tax Ordinance, 2001 was issued for additions under S.111(1)(a) and under S.111(1)(c) of the Income Tax Ordinance, 2001 and there was no un-explained income or expenditure proved by the Officer of Inland Revenue without any shadow of doubt---Order passed under S.122(1), (5) of the Income Tax Ordinance, 2001 was annulled by Appellate Tribunal and restored order under S.120 of the Income Tax Ordinance, 2001 and upheld that of First Appellate Authority.

2007 PTD 2601; 2013 PTD 884; 2013 PTD 1083; 2013 PTD (Trib.) 1335; 2012 PTD (Trib.) 312; 2012 PTD (Trib.) 790; 2006 SCMR 129; Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681; 1993 PTD 392; 2005 MLD 1329 and Khalid Saeed v. Shamin Rizvi 2003 SCMR 1505 rel.

2011 PTD (Trib.) 321; Pakistan Mobile Communications Ltd. v. Commissioner of Income Tax Audit Division and 5 others 2010 PTD 1506; Messrs SME Bank Ltd., v. Additional Commissioner of Income Tax Audit and 4 others Writ Petition No.653 of 2009; 2007 PTD 2319; 2006 GST 255/404/KB of 2001; Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 PTD 766; Income Tax Officer and others v. Chappal Builders (1993) 86 Tax 1 (S.C. Pak); Messrs Pakistan Educational Society v. The Government of Pakistan through Chairman and Secretary Revenue Division, Islamabad and 2 others 1993 PTD 804; Commissioner of Income Tax v. Shahnawaz Ltd. 1993 SCMR 73; Commissioner Income Tax v. Eliy Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279= 2009 PTD 1392; Koh-i-Noor Textile Mills Ltd. v. Commissioner of Income Tax PLD 1974 SC 284 = 1974 PTD 239; Zeal Pak Industries (Pvt.) Ltd. v. Regional Commissioner Income Tax 2009 PTD 712; Central Board of Revenue v. Chanda Motors 1992 PTD 1681 (S.C. Pak.); Commissioner of Income Tax, Zone-C, Karachi v. A.R. Hussain 2006 PTD 1422; 1991 PTD 658; Muhammad Azeem v. CIT Same Ratio 1993 PTD 85; PLD 1971 SC 124; 2006 SCMR 783; 2007 PTD 2601; 2006 PTD 386; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; 2011 PTD 2480; 2011 PTD 1172; 2011 PTD 43; 2010 PTD 1315; 2009 PTD 2074; 2007 PTD 1292; 2009 PTD 1919 and 2000 PTD 359 ref.

(s) Taxation---

----Scope---No tax shall be levied or collected except by authority of law---Tax could only be imposed by a legislative act and not on executive order, said principle embodies the democratic principle "No taxation without representation'---Law imposing a tax must be a valid law, that is, it should not violate any provision of the Constitution and should be within the legislative competence of the legislature---Taxation was valid only if it is made in accordance with the procedure prescribed by the statute---Revenue Department was not constitutionally free to ignore all the procedures of the law and power to tax.

Tariq Mustafa Khan, D.R. for Appellant.

M. Jawaid Khurram for Respondent.

Date of hearing: 21st October, 2013.

2015 P T D (Trib.) 1306

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Asif, Accountant Member

Messrs SADIQ VEGETABLE GHEE MILLS (PVT.) LTD. LAHORE

versus

C.I.T./R, LTU., LAHORE

I.T.A. No.616/LB of 2009, decided on 30th October, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A), 131 & 133(5)---Amendment of assessment---Appeal to Appellate Tribunal---Reference to High Court---Furnishing of copy of judgment of High Court to Tribunal---Appeal, earlier filed by taxpayer, was disposed of by Tribunal, holding that action of Taxation Officer under S.122(5-A) of Income Tax Ordinance, 2001 for the relevant tax year was not sustainable in the eyes of law---Orders of both the authorities below were vacated by the Tribunal and appeal of taxpayer was accepted---Reference filed by department against judgment of Tribunal, was disposed of by High Court, holding that questions of law raised in the Reference had already been answered by the Supreme Court---Provisions under S.133(5) of Income Tax Ordinance, 2001 though required furnishing of a copy of that judgment to Tribunal, but no further action was called for in circumstances---Copy was required to be sent for the purpose of record only---Proceedings in the case, were ordered to be filed.

Shahbaz Butt for Appellant.

Mrs. Samia Ejaz, D.R. for Respondent.

Date of hearing: 20th October, 2014.

2015 P T D (Trib.) 1322

[Inland Revenue Appellate Tribunal]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

Messrs ZAM ZAM CNG, RAWALPINDI

versus

COMMISSIONER INLAND REVENUE, RTO, RAWALPINDI

I.T.As. Nos.155/IB and 156/IB of 2011, decided on 10th January, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122 & 177(4)---Amendment of assessment---Assessee, a CNG dealer----Selection of cases of taxpayer for audit---Definite information---Cases of taxpayer for the year under consideration, were selected for audit and amendment proceedings were initiated---Taxpayer filed appeal against amendment of assessment on the grounds; that selection of his cases for audit was against the provisions of S.177(4) of Income Tax Ordinance, 2001 as well as principles of natural justice; that order of amendment passed by authorities below, without having any definite information was liable to be annulled; that calculation based on so-called "OGRA" formula, which was hypothetical and not prepared or certified by any scientific laboratory or research institution could not constitute any "definite information" and that Assessing Officer was not justified to make additions under the heads "Cost of Sales and Profit and Loss expenses" in the absence of any definite information---Departmental Representative had defended impugned order, contending that sales adopted by Assessing Officer were justified and reasonable; that sales were worked out on the basis of "OGRA" formula prepared on the basis of information provided by "SHGL" and "OGRA" etc. and that amendment proceedings were completed under S.122(1)(5) of Income Tax Ordinance, 2001, and not on the basis of audit---Departmental Representative was unable to putforth any argument on the issue regarding the addition under Cost of Sales and Profit expenses---Contentions of Departmental Representative, were not found to be convincing---Information gathered at present, could not be applied for the period pertaining to past 6/7 years---No effort was made by Assessing Officer to verify that whether "C.N.G." in question was sold in pressure based units of "bars" or weight units under K.G.---Sale price adopted by Assessing Officer had no authenticity---Impugned amended assessment was annulled and assessment deemed under S.120(1)(b) of Income Tax Ordinance, 2001 was restored, in circumstances.

Atif Waheed for Appellant.

M. Jawad, D.R. for Respondent.

Date of hearing: 10th January, 2012.

2015 P T D (Trib.) 1354

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Muhammad Asif, Accountant Member

HONDA POINT (PVT.) LTD., LAHORE

versus

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

M.A. (Stay) No.708/LB and I.T.A. No.913/LB of 2015, decided on 22nd April, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 127, 128 & 131---Recovery of tax before disposal of appeal against order-in-original before the Commissioner (Appeals) under S.127 of the Income Tax Ordinance, 2001---Application for grant of interim injunction against recovery of tax before disposal of appeal before the Commissioner (Appeals)---Appellant Taxpayer/assessee impugned order of Commissioner (Appeals) whereby application of taxpayer assessee for stay of recovery proceedings initiated by the Department, was rejected---Contention of the taxpayer assessee was that the tax demand had yet to pass the test of appeal and recovery of the same till disposal of appeal before Commissioner (Appeals) was unjustified---Validity---Income Tax Appellate Tribunal directed the Department not to pursue recovery, in any manner, till decision of the main appeal by the Commissioner (Appeals) on the ground that recovery should not be made till disposal of appeal by an independent forum---Departmental Authorities were further directed to de-attach bank accounts of the taxpayer assessee till decision by the Commissioner (Appeals) and directed that the said appeal before the Commissioner (Appeals) should be decided within a period of three weeks---Appeal was allowed, accordingly.

Messrs Z. N. Exports (Pvt.) Ltd. v. Collector of Sales Tax 89 Tax 177 = 2003 PTD 1746 = 2003 GST 283 and 2011 PTD 1290 rel.

Waheed Shahzad Butt for Applicant.

Rao Shehzad, D.R. for Respondent.

Date of hearing: 22nd April, 2015.

2015 P T D (Trib.) 1363

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fiza Muzaffar Accountant Member

Messrs AL-ZAMIN TEXTILE MILLS LTD., FAISALABAD

versus

C.I.R.(A), FAISALABAD and others

S.T.A. No.1109/LB of 2014, decided on 9th December, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(37), 4, 11, 23, 33, 34, 46 & 73---SRO 283(I)/2011 dated 1-4-2011---S.R.O. 1125(I)/2011 dated 31-12-2011---Tax fraud---Proof---Making zero-rated supplies---Assessment of tax---Imposition of penalty and additional tax---Appeal to Appellate Tribunal---Appellant/registered person, made zero-rated supplies of yarn to a (wholesaler) registered buyer---Appellant received all payments of transactions through Bank by delegate of the buying party---Authority alleged that appellant/supplier had made supplies to unregistered person and issued invoices to registered buyer just to avoid payment of sales tax at 6% under S.R.O. 283(I)/2011 dated 1-4-2011 and S.R.O. 1125(I)/2011 dated 31-12-2011---Adjudication proceedings were initiated by Adjudicating Authority by way of issuance of a show-cause notice to show as to why amount of sales tax could not be recovered from appellant under S.11(3) of Sales Tax Act, 1990 on account of output tax along with default surcharge under S.34 and penalty under S.33 of Sales Tax Act, 1990---Despite production of record, at both lower forums, appellant failed to get any relief---Validity---Pre-requisite for availing benefit of zero-rating under said Notifications, three conditions were to be fulfilled for a qualifying person (i) doing business in five major zero-rated sectors; (ii) registered under Sales Tax Act, 1990 as manufacturer, importer, exporter or wholesalers and (iii) appearing on an Active Taxpayer List---All those conditions had duly been met with by the appellant; as the person to whom supplies had been made, was doing business in five notified major zero-rated sectors---Held, that supply of "yarn" being notified textile goods fell in five major zero-rated sectors---Benefit of notifications was available to the person doing business in textile and articles thereof---Delegation of powers for operation of bank account to any person, other than owner, but by the authority and consent of owner, could not be termed as 'tax fraud' as defined under S.2(37) of Sales Tax Act, 1990, without establishing any act of dishonesty and fraudulence by the registered person itself---Any record/documents produced by taxpayer during the course of adjudication proceedings, either at the original stage or at the appellate stage, if not discussed and controverted, and had gone unchallenged and unrebutted by the tax functionaries, would itself amount to admission of its legality and authenticity---Supplies made by appellant pertaining to the period when alleged buyer was an operative/active person and not included in the list of blacklisted units; and his subsequent inclusion in that very list of blacklisted units could not operate retrospectively---Beneficial executive order and notification issued by an Executive Functionary could be given retrospective effect---Where any adverse finding was given in the adjudication order on the allegations or violation of provisions of law, which were not incorporated and confronted in the show-cause notice, the entire proceedings would be rendered as illegal and void for reason of breach of natural justice, which was also breach of law---Impugned orders passed by authorities below being suffering from grave legal infirmities, were declared to be illegal, void ab initio, and were set aside, in circumstances.

Army Welfare Sugar Mills Ltd and others v. Federation of Pakistan and others 1992 SCMR 1652; Government of Pakistan v. Messrs Village Development Organization 2003 SCMR 492; Messrs Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340; Commissioner Inland Revenue v. Rana Riasat Tufail and others 2014 PTD 1530 and The Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1840 ref.

Khubaib Ahmad for Appellant.

Javed Iqbal Sheikh, D.R. for Respondents.

Date of hearing: 9th December, 2014.

2015 P T D (Trib.) 1370

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Majid Qureshi, Accountant Member

Messrs PAKISTAN TELECOMMUNICATION COMPANY LTD.

versus

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

S.T.A. No.195/IB of 2012, decided on 5th March, 2014.

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

----Ss.3(1), 2(21a), 7, 16(1), 36(1) & First Sched: Table-II, Entry No.6---Customs Act (IV of 1969), First Sched:, Heading 9812.1210---S.R.O. No.550(I)/2006 dated 5-6-2006---Levy of duties specified in the First Schedule of the Federal Excise Act, 2005---Sales tax mode---"Interconnect services" charges---Charge of Federal Excise duty along with default surcharge and penalty---Scope---First Appellate Authority confirmed such levy on the ground, based on the contention of the department, that those telecom operators who shared their infrastructure to facilitate their subscribers to get connected with each other and those telecom operators charging each other for rendering such "interconnect services" should issue invoice for that revenue and pay the excise duty on that service received on account of "interconnect service"; and registered person was bound to issue invoices and charge Federal Excise duty on rendering of "interconnect services" against the companies to whom services had been rendered as the law did not provide any kind of immunity to the registered person for not issuing the sales tax/federal excise duty invoice after rendering of any taxable service---Taxpayer contended that intention of the legislature was not to tax interconnect charges twice; and collective reading of Ss.3(1), 16(1) and Entry No.6 of Table-II of the First Schedule to the Federal Excise Act, 2005 revealed that all telecommunication services under sub-heading of heading 98.12 as contained in the First Schedule to the Customs Act, 1969 were excisable; that S.3(1) charged all services provided in Pakistan at the rate of 15% except those services listed in the First Schedule to the Federal Excise Duty Act, 2005 which shall be taxed at the rates mentioned in the Schedule; that Federal Excise Act, 2005 having charged all services through S.3(1), exempts all services through S.16(1) except those services listed in the First Schedule; that interconnect charges being part of the Cellular telephone service, PTCL's charges were taxed when the caller from a cell phone was billed for the entire amount of the call charges including PTCL's "interconnect service;" that having been taxed as part of the sub-heading "Cellular telephone" and there being no separate sub-heading for "interconnect services" conclusively proved that "interconnect services" were not taxable independently; that there was no separate entry for "interconnect services" and only for Cellular Telephone clearly speak of the legislative intent nor tax "interconnect charges" twice; and that interconnect services were taxable and indeed taxed but only as a component of Cellular Telephone services and not independently---Validity---Judgment of Islamabad High Court in Writ Petition 2957 of 2012 dated 8-1-2014 Warid Telecom (Pvt.) Ltd. v. Federation of Pakistan 2014 PTD 752 held ground as a binding precedent for all lower forums---Appellate Tribunal followed the ratio decidendi of the judgment of High Court which was clearly in favour of the taxpayer---On the basis of such reasons, order of First Appellate Authority was vacated and the show-cause notice as well as Order-in-Original were cancelled.

Wrid Telecom Ltd. v. Federation of Pakistan 2014 PTD 752 rel.

Writ Petition No.4197 of 2010 dated 9-3-2011; Commissioner of Income Tax-I, Karachi v. Orix Leasing Pakistan Ltd., 2007 PTD 1151 = 95 Tax 367; Manjilas Rice Mills v. State of Kerala (2007) 6 VST 403 Ker and Civil Petition No.1829 of 2012 ref.

(b) Precedent---

----Suspended judgment continues to hold force as a binding precedent, for persons other than those who were parties in the suspended judgment, to the extent of the decision based upon or which enunciate a question of law.

PLD 1980 Kar. 492 and PLD 1975 Lah. 65 rel.

Khawaja Farooq Saeed and Shaukat Amin Shah, FCA for Appellant.

Irfan Abbas, D.R. and Saeed Ahmed Zaidi, L.A. for Respondent.

Date of hearing: 26th February, 2014.

2015 P T D (Trib.) 1400

[Inland Revenue Appellate Tribunal]

Before Adnan Ahmed Member, (Judicial-II)

COLLECTOR OF CUSTOMS

versus

HAJI SAEED AHMED and 2 others

Custom Appeal No.K-155 of 2014, decided on 3rd July, 2014.

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

----Ss. 194A (2), 2(s), 9, 10, 16, 26, 156, 157, 177 & 215---Import and Exports Control Act (XXXIX of 1950), S.3---S.R.O. No. 499(I)/2009 dated 13-6-2009---S.R.O. No. 466(I)/2009 dated 13-6-2009---Appeal to Appellate Tribunal---Filing of appeal by the Assistant Collector of Customs-MCC of Preventive on the strength of affidavit and without authorization in writing from the competent authority---Validity---Federal Board of Revenue or Collector of Customs if aggrieved by an order passed by Additional Collector of Customs, could prefer an appeal to the Appellate Tribunal---Such appeal shall be preferred by an officer, not below the rank of Assistant Collector or Assistant Director so authorized in writing by the Board or the Collector or the Director as the case may be---Emphasis was on "aggrieved", "Collector" or "Director: & "authorized in writing" by the Board or the Collector or the Director---"Aggrieved person" denoted a person who had got a legal grievance i.e. a person illegally or wrongfully deprived of anything to which he was legally entitled to and Collector and Director meant Head of Collectorate or Directorate, whereas authorized in writing meant Board or Collector & Director were empowered on it or his behalf any of the Assistant Collector or Director to prefer appeal with the Appellate Tribunal and said authorization was to be filed with the appeal---Affidavit denoted that appeal had been filed by the Collectorate, which was non-entity by virtue of the fact that it was a department and could not be termed within the ambit of the word "aggrieved person", even otherwise Collectorate could not file appeal as the word "Collectorate" figure nowhere in the expression of S.194A(2) of the Customs Act, 1969---Fact of the matter was that the appeal had been filed by Assistant Collector of Customs-MCC of Preventive in his personal capacity and signed the appeal; confirming that he had no authorization of the Competent Authority i.e. Collector of Customs---Appeal was not to be deemed to have been validly filed in accordance with law and Assistant Collector filed such appeal without any lawful authority---Separate appeals had to be filed where there were two respondents---No appeal, in circumstances, had been filed against the respondent---Even otherwise, appellant had no locus standi to file appeal as per the expression of subsection (2) of S.194-A of the Customs Act, 1969---Appeals having not been had not been competently filed were not maintainable and were dismissed in limine.

2009 PTD 1799; 2008 PTD 356; Director Directorate General of Intelligence and Investigation-Customs and Excise, Karachi v. Al-Faiz Industries (Pvt.) Ltd., and another 2006 SCMR 129;Collector of Customs Sales Tax and Central Excise v. Hussain and Company, Islamabad 2013 PTD 1026 and Collector of Sales Tax and Federal Excise Peshawar v. Cherat Paper Sacks Ltd., 2013 PTD 372 rel.

Sikandar A. Karim v. The State 1995 SCMR 387 ref.

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

----S. 194-B---Orders of Appellate Tribunal---Filing of appeal after lapse of 30 days from the date on which order under S.194-B of the Customs Act, 1969 was served on Collector---Appeal would be barred by time---Appeal was not filed in accordance with law and there was contravention and violation of the mandatory provisions of law---Such appeal would be deemed to be nullity having no legal existence---Filing of the appeal after lapse of 30 days from the date on which the order under S.194-B of the Customs Act, 1969 was served on the Collector---Such appeal would be barred by time---Each and every word appearing in a provision of law was to be given effect to and no word was to be rendered as redundant or surplus---When the legislature required the doing of a thing in a particular manner then same was to be done in that manner and all other manners or modes of doing or performing that thing were barred---If the doing of a thing is made lawful in a particular manner then doing of that thing in conflict with the manner prescribed will be unlawful as per maxim "Expressum facit cessare tacitum".

Malik Safdar for Appellant.

Nadeem Ahmed Mirza for Respondent.

Date of hearing: 16th April, 2014.

2015 P T D (Trib.) 1422

[Inland Revenue Appellate Tribunal]

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

C.I.R. R.T.O, ISLAMABAD

versus

Messrs Nera ASA

I.T.As. Nos.724/IB and 697/IB of 2011, decided on 13th December, 2011.

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

----Ss. 114 & 122(9)---Revised return---Amendment of assessment---Issuance of notice to taxpayer---Taxpayer after filing of the revised return, had a vested right of being heard through issuance of notice under S.122(9) of the Income Tax Ordinance, 2001, pointing out the deficiencies etc. observed by Assessing Officer in the revised return---Requirement of issuance of said notice was a provision of substantive law and non-issuance of notice could not be simply ignored as procedural irregularity---Issuance of said notice embodied Maxim "audi alteram partem" (no one should be condemned unheard)---Notice under S.122(9) of Income Tax Ordinance, 2001, having not been issued to the taxpayer, Assessing Officer lacked jurisdiction to proceed with the amendment proceedings---Revenue having failed to establish any legal or factual infirmity in the impugned order same was confirmed.

2006 PTD 1088 ref.

(b) Administration of justice---

----When law required something to be done in a particular manner, then that very thing should be done in that very particular manner.

Tariq Mehmod Bhatti, D.R. for Appellant (in I.T.A. No.724/IB of 2011).

Atif Waheed for Respondent (in I.T.A. No.724/IB of 2011).

Atif Whaeed for Appellant (in I.T.A. No.697/IB of 2011).

Tariq Mehmood Bhatti, D.R. for Respondent (in I.T.A. No.697/IB of 2011).

Date of hearing: 13th December, 2011.

2015 P T D (Trib.) 1425

[Appellate Tribunal Inland Revenue]

Before Syed Nadeem Saqlain, Chairman and Sohail Afzal Accountant Member

Messrs SHAHEEN CHEMIST SHOP, RAWALPINDI

versus

C.I.R., R.T.O., RAWALPINDI

I.T.A. No.441/IB of 2011, decided on 29th June, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 120, 121 & 122---Return of income---Filing of revised return---Amendment of assessment---Assessing Authority, formulated amended assessment, wherein not only sales, as declared by the assessee, were enhanced, without any basis, but also made 30% lump sum addition out of Profit and Loss Expenses, simply on the ground that taxpayer had been filing revised returns again and again---Validity---Taxpayer under S.122(3) of Income Tax Ordinance, 2001, had been allowed to file revised return and no restriction had been imposed with regard to the number of times, taxpayer could file revised return---Law had not postulated that adverse inference would be drawn in case revised return was filed more than one time---Section 122(5) of Income Tax Ordinance, 2001, did not empower the Taxation Officer to act whimsically---Lump-sum addition out of Profit and Loss Expenses, could not be made---Impugned order was set aside and amended assessment passed by the Taxation Officer, was cancelled, in circumstances.

Atif Waheed for Appellant.

Zia-Ullah Khan, D.R. for Respondent.

Date of hearing: 29th June, 2011.

2015 P T D (Trib.) 1438

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar Accountant Member

Messrs PAUL LEATHER INDUSTRIES, LAHORE

versus

C.I.R., ZONE-X, R.T.O., LAHORE

S.A.T. No.1107/LB of 2014, decided on 11th November, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 11, 25, 33, 34, 38, 45-A, 46 & 72-B---S.R.O. No.509(I)/2007 dated 9-6-2007---S.R.O. No.283(I)/2011 dated 1-4-2011---S.R.O. No.1125(I)/2011 dated 31-12-2011---Refund allegedly sanctioned on account of inadmissible input tax---Recovery of---Appellant/taxpayer, on basis of contravention report received from the Directorate of Intelligence and Investigation, was found to have claimed inadmissible input tax of Rs.2,48,544,863 on the basis of false zero rated sales during relevant tax period---Out of said amount of input tax, sales tax refund amounting to Rs.205,115,466 had been sanctioned by the department---On scrutiny of record, Assessing Officer observed that appellant had declared zero-rated supplies of 'Rexene', manufacture of which required use of fabric as essential ingredient, but appellant had neither purchased any fabric nor its consumption was shown in the inventory record---Assessing Officer concluded that appellant had manufactured and supplied plastic sheets only, which were not zero-rated; and were liable to payment of output tax at standard rates---After issuance of show-cause notice to the appellant, Assessing Officer directed appellant to deposit refunded sales tax amount along with default surcharge and penalty---Appellate Authority, allowed partial relief to the appellant---Validity---Entire case was based on presumption, and was just fishing enquiry to create bogus demand against appellant/taxpayer---Show-cause notice, issued to appellant was second show-cause notice, and according to law, second show-cause notice on the same issue, and on the same basis, was legally not permissible---Entire proceedings and contravention report was based on mala fide, misstatement of facts and circumstances of the case---Appellate Authority, while confirming action of Assessing Officer ignored the fact of manufacturing of 'Rexene'---Appellant was a manufacturer of 'Rexene' in the tax period under consideration, and used textile fabric for making Rexene---Said fabric, was of poor quality manufactured in 'KHADIES' and manufacturers (Khadies) were not registered with Sales Tax Department; and the fabric was covered under zero-rated schemes---Appellant purchased the fabric from the unregistered persons and declared in column of other local zero-rated sales---Held, that appellant/taxpayer was a manufacturer of Rexene, and the contravention report was made on the basis of conjectures and surmises---Federal Board of Revenue under provisions of S.45-A of Sales Tax Act, 1990, did not possess any authority to examine the legality or propriety of its own orders---Order of Appellate Authority was vacated, and that of Assessing Officer, was cancelled, in circumstances.

2003 SCMR 501; 2002 SCMR 134; 1997 SCMR 209; 2013 SCMR 85; 1997 PTD 1555 (S.C.); 2005 PTD 965 (Trib.); 2012 PTD (Trib.) 105; 2004 PTD 3020; 2011 PTD 1232 and 2012 PTD 1815 ref.

Mrs. Ayesha Qazi, Tahir Mehmood, Tax Manager, and Miss Sumaira Khurshed for Appellant.

Dr. Razi ur Rehman, D.R. for Respondent.

Date of hearing: 11th November, 2014.

2015 P T D (Trib.) 1465

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

Kh. SHAHBAZ AHMAD

versus

C.I.R., R.T.O., GUJRANWALA

I.T.A. No.704/LB of 2014, decided on 20th August, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111, 114, 120, 122, 127 & 131---Filing of return of income---Assessment---Amendment of assessment order---Limitation---Taxpayer filed return of income on 6-5-2008 for the tax period ending on 30-6-2008 declaring his income, which, with the operation of law, attained status of assessment in terms of S.120(1) of Income Tax Ordinance, 2001---Subsequently Assessing Officer finding certain amount as "unexplained income", amended the assessment order after expiry of period of five years from the date when assessment order had attained finality---Amendment order passed after expiry of limitation period as provided under S.122(2) of Income Tax Ordinance, 2001, being time barred, was vacated, in circumstances.

2009 PTD 37; 1988 SCMR 715; 2011 PTD 1558 and CIR v. Maj. Gen. (R) Dr. C.M. Anwar and others I.T.R. No.1 of 2013 ref.

Majd Jahangir for Appellant.

Ms. Fauzia Adil D.R. for Respondent.

Date of hearing: 20th August, 2014.

2015 P T D (Trib.) 1490

[Inland Revenue Appellate Tribunal]

Before Abdul Qayyoom Sheikh, Judicial Member and Sikandar Aslam, Accountant Member

Messrs MADNI PACKAGES (PVT.) LTD.

versus

COMMISSIONER (I.R.), ZONE-IV, RTO-II, KARACHI

S.T.A. No.175/KB of 2013, decided on 27th November, 2014.

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

----Ss. 8, 8-A, 11, 33, 34, 46 & 73---Show-cause notice for recovery of sales tax, default surcharge and penalty on the allegation of illegally claimed/adjusted inadmissible input tax---Appellate Authority below maintained order passed by Adjudicating Authority---Validity---Adjudicating Authority mentioned irrelevant series of provisions of Sales Tax Act, 1990 in show-cause notice---Authority was required to frame specific allegations in show-cause notice and to pass order under specific subsection of S.11 of Sales Tax Act, 1990, which had not been done---If law prescribed thing to be done in particular manner, such provision of law, was to be followed in letter and spirit---In view of the vague and ambiguous show-cause notice containing irrelevant provisions of law, with no specific allegations attached thereto and finalization of order-in-original and confirmation thereof by Appellate Authority under no provisions of law, were lawful in circumstances.

2004 PTCL 18; 2007 PTD 2265; 2005 PTD 480; 2011 PTD 808; 2001 SCMR 838; 2003 SCMR 1505; 2011 PTD 2480 at 2516; 2006 PTD 2567; PLD 1997 Lah 692; Messrs Rain Drop Lahore v. Commissioner Inland Revenue (Appeals III) Lahore 2012 PTD (Trib.) 885; Messrs D.G. Khan Cement Company Ltd. v. Federation of Pakistan and others 108 Tax 226; 2011 PTD (Trib.) 162; Messrs Fine Packages v. CIR 2012 PTD (Trib.) 946; Messrs N.Z. Exports (Pvt.) Ltd. Faisalabad v. CIR, S.T.A. No.269/LB of 2010 and CIR-RTO, Lahore v. Messrs Eagle Cables (Pvt.) Ltd. cited as S.T.A. No.421/LB/2013 ref.

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

----Ss. 8-A & 46---Qanun-e-Shahadat (10 of 1984), Arts.117 & 118---Reclaiming or deduction of input tax---Entitlement---Provisions of S.8-A of Sales Tax Act, 1990, were not attracted in the appellant/company's case, because to attract such provisions---Initial burden lay on the department to establish that taxpayer had prior 'knowledge' or 'reasonable grounds' to suspect the supplier that the sales tax paid to him, would remain unpaid---Appellant company, under the prescribed mechanism of Value Added Tax (VAT) had made payments of input tax to his suppliers; and had no access to confirm that the suppliers had made the payment in the Government treasury or not---Mere allegation that alleged suppliers were blacklisted, suspended and fake, was not enough, without a corroborating evidence for denying the lawful right of input tax of the buyer---Appellant company, could not be evolved as a joint liable and induction of contravention, did not qualify---Provisions of S.8-A of Sales Tax Act, 1990, being not retrospectively were not applicable in the appellant's case.

Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others Writ Petition No.3515 of 2012; 2007 PTD 67 (SC Pak) and 2007 CLD 1642 ref.

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

----Ss. 8(1)(ca)(d), 22, 24 & 46---Input tax adjustment---Claim for---Tax fraud---Liability of department---Appellant firm provided purchase invoices issued by the suppliers, as an evidence to claim input tax adjustment---Department had power to conduct post refund audit and call for any record---Appellant firm having maintained and retained all records in accordance with Ss.22 & 24 of Sales Tax Act, 1990, question of non-availability of records did not arise in the case of appellant---Appellant provided to the department all relevant records of purchases along with written arguments, but same were not considered by Adjudicating Authority---Department was liable to conduct inquiry in order to ascertain the facts that as to why the registered suppliers had not declared correct supplies in their record and concealed the supplies and why the suppliers failed to deposit due tax in the National exchequer---Department was further liable to conduct verification, or complete audit of the record of alleged suppliers, to issue them show-cause notice pointing out the discrepancies---Appellant firm had purchased the goods from the registered supplier, and paid due tax at the time of payment of goods including sales tax---Check and balance, rested with department and not with third party---Appellant being third party was not responsible of activities of alleged suppliers---Provisions of S.8(1)(a) of Sales Tax Act, 1990, were not attracted in appellant's case---No violation having been committed by the appellant firm, provisions of S.8(1)(d) of Sales Tax Act, 1990 were not attracted in the case---Said provisions could only be invoked in cases, where charge of "collusion" or "tax fraud" had been levelled and established by the department---Party making an allegation, must bring material evidence to prove the irregular, false, collusive and fraudulent transaction, but department had not been able to place on record any evidence by which it could be inferred that invoices issued by the supplier, were fake---Appellant firm, which had paid the input tax covered by the invoices, could not be denied the statutory right of claiming its adjustment---Neither the charge of 'tax fraud' nor 'collusion', had been established against the appellant firm---Whole proceedings were infested with inherent legal infirmities, which were required to be annulled.

Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others Writ Petition No.3515 of 2012 and Black's Law Dictionary, 8th edition ref.

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

----S. 2(37)---Tax fraud---Burden of proof---In order to attract the provisions of S.2(37) of Sales Tax Act, 1990, dealing with tax fraud, initial burden lay on the department to show that the taxpayer, knowingly, dishonestly or fraudulently and without any lawful exercise, had done any act; or caused any act to be done; or had omitted to take any action; or had caused the omission to take any action in contravention of duties or obligations imposed under the Act or Rules---In the present case, appellant firm was registered by the department, and given sales tax number after due verification of record---Appellant firm, in circumstances, could not be condemned and punished for the wrong doings or the acts of the State functionaries.

2002 SCMR 134 and (PLD) 1994 (H.C. Lah.)(sic) ref.

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

----S.21---De-registration, blacklisting and suspension of registration---Retrospective effect---Scope---If blacklisting or suspension of registration of a supplier was effected subsequent to a period in which purchases and bank payments were transacted, supplier could not be made a tool to deprive the buyer of a valuable right accrued in his favour prior to such blacklisting, or suspension of registration of any supplier due to subsequent default, whatever on his part---Executive orders or notification, which conferred rights and were beneficial, would be given retrospective effect; and those which adversely affect or invade upon vested right, could not be applied with retrospective effect---Taxpayer, in the present case, could not be deprived from his valuable right through retrospective application of S.21 of Sales Tax Act, 1990.

2001 SCMR 1161; 2002 PTD 976; 2014 PTD 558 and Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 ref.

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

----Ss. 2(37) & 33---Tax fraud---Imposition of penalty---Both authorities below, had erred in law and on facts of the case in imposing/upholding 100% penalty on appellant company---Penalty proceedings under the fiscal laws were independent proceedings and had nothing to do with the criminal proceedings, that could be pending anywhere else; particularly when no evidence relating to such proceedings was ever provided to the appellant during the original or appeal proceedings---Appellate authority, in the present caes, had confirmed 100% penalty under S.33(3) of the Sales Tax Act, 1990, as according to said authority act of alleged unlawful adjustment would come within the ambit of "tax fraud" defined in S.2(37) of the Sales Tax Act, 1990---Appellant was a duly registered person, by levelling allegation of tax fraud by the department would not make out a case to subject the appellant to penalty equal to the amount of alleged inadmissible adjustment---Imposition of 100% penalty, without first establishing that appellant had committed anything wrong or contravened any provisions of law knowingly, and dishonestly, was patently illegal, harsh, unjustified and without any logic---Imposition of 100% penalty on appellant, was void ab initio and without any justification---No penalty could be imposed without first establishing the mens rea---Order-in-original passed by Adjudicating Authority, being illegal and void ab initio, order of Appellate Authority, was vacated; and order passed by Adjudicating Authority, was annulled, in circumstances.

2004 PTD 868; 2004 PTD 1048; 2007 PTD 901 and 2011 PTD 693 ref.

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

----Art. 1---Qanun-e-Shahadat, 1984---Scope and applicability---Qanun-e-Shahadat, 1984 was applicable to all proceedings in or before any court including a Court Martial a tribunal or other authority exercising judicial or quasi-judicial proceedings.

(h) Words and phrases---

----'False'---Dictionary meaning.

Black's Law Dictionary ref.

Abdul Wahid Tejani, ITP for Appellant.

Hyder Abbas, D.R. for Respondent.

Date of hearing: 13th November, 2014.

2015 P T D (Trib.) 1543

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs AL-AZIZ PAPER MILLS, LAHORE

versus

COLLECTOR F.E. & S.T., LAHORE

F. Ex. No.70/LB of 2009, decided on 22nd August, 2014.

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

----Ss. 33, 36 & 46---Short payment of Excise Duty and Sales Tax---Recovery---Limitation---Assessee, alleged to have made short payment of Central Excise Duty and Sales Tax, was served with show-cause notice---Adjudicating Officer, under provisions of S.36(3) of Sales Tax Act, 1990 was to pass order-in-original for recovery of said short payment within 90 days of issuance of show-cause notice, but he passed the order after three hundred and ninety eight days from date of issuance of show-cause notice, which was beyond period of prescribed period of limitation---Adjudicating Officer had not sought extention of said period from Competent Authority---Order-in-original passed much beyond the statutory period of limitation, had no legal sanctity in the eyes of law---Appellate Authority was not justified to reject the appeal of assessee against order-in-original passed by Adjudicating Authority---Both order-in-original and order-in-appeal, were set aside, in circumstances.

2011 PTD (Trib.) 2216; 2010 PTD (Trib.) 2670; 2010 PTD (Trib.) 2117; 2009 PTD (Trib.) 1263; 2008 PTD 2025 and 2008 PTD 60 ref.

(b) Administration of justice---

----Where basic action/order was without lawful authority, superstructure built on the same had to fall on the ground automatically.

Shahid Baig for Appellant.

Mrs. Misbah Nawaz, D.R. for Respondent.

Date of hearting: 22nd August, 2014.

2015 P T D (Trib.) 1572

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Muhammad Riaz Accountant Member

ARMY WELFARE TRUST

versus

COMMISSIONER INLAND REVENUE LARGE TAXPAYERS UNIT, ISLAMABAD

I.T.As. Nos. 139/IB and 140/IB of 2014, decided on 12th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 205 & 152 (5A)---S.R.O. No. 586(I)/191 dated 30-6-1991---Failure to pay tax collected or deducted---Remand of case for de novo consideration instead of vacating the same---Taxpayer contended that payments made to non-resident on account of 'hire charges' (lease) of aircraft which had been exempted from the withholding tax provision through specific certificate issued by the concerned Commissioners under S.152(5A) of the Income Tax Ordinance, 2001 had not been considered; that payment of lease charges to non-resident lessor for aircraft was made as well and break up thereof was also filed during the course of proceedings; that examination of record could have prevented the Assessing Officer to hold the taxpayer in default in respect of these payments made to non-residents as office copies of exemption certificates from the concerned Commissioner was dispensed with by amending the provisions of S.152 of the Income Tax Ordinance, 2001 and the taxpayer was allowed to make payment of hire charges (lease) without deduction of tax on its own; that similarly, taxpayer was treated as a taxpayer in default even in respect of non-cash items and the expense incurred under the heads covered by exemption under S.R.O. No. 586(I)/1991 dated 30-6-1991; that all such facts amply suggest that Taxation Officer had neither looked at withholding statements nor the other relevant record to identify instances of non-compliance by the taxpayer; that Taxation Officer was bound to undertake such exercise; that even if the Taxation Officer's observation regarding non-compliance with statutory notices was accepted, there was no rebuttal to the fact that audited accounts and monthly withholding statements filed by the taxpayer electronically were available with the Taxation Officer and she was bound to examine the record at least to the extent of audited accounts and monthly withholding statements and confront the taxpayer with the deficiencies and short comings and seek necessary explanations from it; and that this did not appear to have been done and easy way was found in passing a sweeping and arbitrary order burdening the taxpayer with huge illegal tax liability---Validity---Facts highlighted by the taxpayer depicted a very bleak picture of the situation prevailing in the Revenue Offices---Order passed under Ss.161/205 of the Income Tax Ordinance, 2001 without examination of record resulted in holding the taxpayer as a taxpayer-in-default even in respect of payment of lease charges made to non-resident lessors, expenses covered under S.R.O. No. 586(I)/91 dated 30-6-1991, amounts which had not been paid up to the closing date and non-cash items although a little bit of care could have forestalled the possibility of taxation of such transactions---Appellate Tribunal observed that person entrusted with the responsibility of dispensation of justice must apply the law in a correct manner even though the person to whom the law was to be applied may not have been able to make forceful pleading---Erratic and arbitrary disposal of the case was noticed in utter disregard of the norms of justice, judicial propriety and disregard for the legal procedure to be followed before raising tax liability---First Appellate Authority did notice all such shortcomings in the order of Taxation Officer but failed to take a decision which the superior courts, in such circumstances, had taken and directed the subordinate forums to take; instead of vacating the order, First Appellate Authority remanded the case to the Taxation Officer exposing the taxpayer again to the high-handedness exhibited earlier---Such a dispensation of justice was not approved---Order passed by the Taxation Officer was ridden with glaring legal flaws---Remand of case for de novo consideration was not endorsed by the Appellate Tribunal as doing so would tantamount to gross injustice to the taxpayer---Order passed under Ss. 161/205 of the Income Tax Ordinance, 2001 was not sustainable in the eyes of law and was vacated.

Tahir Razzaque Khan FCA; Haroon Israr, FCMA and Shaheer Bin Tahir for Appellants.

Hassan Zulfiqar, Departmental Representative for Respondent.

Date of hearing: 12th March, 2014.

2015 P T D (Trib.) 1591

[Inland Revenue Appellate Tribunal]

Before Fiza Muzaffar, Accountant Member and Jawaid Masood Tahir Bhatti, Chairperson

I.T.As. Nos. 1632/LB and 1705/LB of 2013, decided on 14th February, 2014

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

----Ss. 156-A, 161 & Second Schedule, Part IV, Clauses 46 & 48---Purchase of raw material Bitumen---Failure to pay tax collected or deducted---Assessing Officer, charged tax under S.161 of Income Tax Ordinance, 2001 on the ground that purchases in question were not made from the National Refinery and Attock Oil Limited---Appellate Authority remanded the matter to the Assessing Officer for de novo decision---Validity---Appellate Authority was not justified to remand the matter, when payments made by the taxpayer were not subjected to withholding tax in terms of clause (46) of Part IV of Second Schedule of Income Tax Ordinance, 2001---Taxpayer had duly provided purchase invoices, and evidence of payments through crossed cheques, but the Assessing Officer had charged tax on the plea that Oil Refineries, had not declared the purchases in their sales tax returns---Objection was not maintainable as the taxpayer was not a "registered sales tax person"---Some payments were made by the taxpayer to distributors, which were also not liable to withholding tax in terms of S.156-A of Income Tax Ordinance, 2001---Order of Appellate Authority, being not maintainable, was vacated; and the tax charged under S.161 of Income Tax Ordinance, 2001, by the Assessing Officer was deleted being not maintainable in the eyes of law.

2002 PTD 1 ref.

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

----Ss. 156-A & 161---Charging tax on purchase of POL , Diesel, Lubricants, and LPG gases---Assessing Officer charged tax on purchase of POL, Diesel, Lubricants and LPG Gas---Appellate Authority on appeal remanded the matter to Assessing Officer to revisit the case and decide the same according to law---Validity---Tax deduction, was not liable in case of purchase of POL, Diesel, Lubrication and LPG as provided in S.156-A of Income Tax Ordinance, 2001---No fruitful purpose, would be served by remand of case; order passed by Appellate Authority, could not be maintained---Tax charged by Assessing Officer, was deleted being not tenable in the eye of law.

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

----Ss. 53, 159 & 161---Charging tax on purchases made from parties having exemption certificate---Assessing Officer charged tax under S.161 of Income Tax Ordinance, 2001, on the ground that purchases were not made from the parties, which were claimed by the taxpayer being not liable to withholding provisions---Appellate Authority instead of considering pleas of the taxpayer, remanded matter to the Assessing Officer---Validity---Appellate Authority, was not justified to remand the matter in the case of parties who were not liable to withholding tax having been declared exempt by the department---Requisite exemption certificates were duly produced before the authorities below and before Appellate Tribunal---No reason existed to maintain order of Appellate Authority---Order of Appellate Authority was vacated and tax charged from said parties was deleted---Regarding remaining parties, taxpayer duly produced the relevant purchase invoices, and payments proof from bank---No justification was available, in circumstances, to charge tax on that behalf, on the ground that purchases were not declared by the supplier company in its sales tax returns---Taxpayer also submitted copy of income tax return of the supplier company which had discharged its tax liability---No reason existed to charge tax from said parties, which amounted to double taxation, which was not permissible---Tax charged under S.161 of Income Tax Ordinance, 2001, was deleted, and order of Appellate Authority, was vacated, in circumstances.

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

----S.161---Charging tax on Labour wages---Assessing Officer charged tax on payments made by taxpayer company towards payment, made to daily wage workers---Appellate Authority on appeal remanded the case to Assessing Officer for de novo decision---Validity---When Appellate Authority was convinced that payments made were below the threshold of taxation it should have deleted the same---Taxpayer had duly produced the relevant documentary evidence that the payments related to wages of daily workers regarding 32 projects carried out by taxpayer company in the Northern area, especially the flood affected areas---Order of Appellate Authority being not maintainable, was vacated, and tax charged under the said head, was deleted in circumstances.

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

----Ss. 153 & 161---Charging tax on cost of crush, sandstone, stone dust etc.---Assessing Officer charged tax under S.161 of Income Tax Ordinance, 2001 on cost of crush, sandstone, stone dust etc. which action, on appeal, was remanded by Appellate Authority---Contention of taxpayer was that when Assessing Officer was convinced that purchases made from each individual did not exceed the threshold, limit of taxation he should have deleted the same---Since the taxpayer had provided the relevant details to support his claim that the payments made were below the threshold as prescribed under the provisions of S.153 of the Income Tax Ordinance, 2001, no justification existed for taxing the same---Tax charges under said head was deleted and order of Appellate Authority was vacated, in circumstances.

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

----S. 161---Charging tax on Laboratory charges---Remand of case---Assessing Officer charged tax under head 'Laboratory charges', which action was not approved by Appellate Authority, but instead of deciding the matter, remanded the case to Assessing Officer for de novo decision---Validity---Record had shown that payments made under said head, were petty in nature, and same were made to Government Institutions---No justification existed in circumstances, to remand the case---Order of Appellate Authority, was vacated and tax charged under said head, was deleted, in circumstances.

Ayub Aftab for Petitioner.

Sajjad Tasleem, D.R for Respondent.

Date of hearing: 14th February, 2014.

2015 P T D (Trib.) 1614

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Majid Qureshi, Accountant Member

INAM PLASTIC STORE

versus

C.I.R, R.T.O., SARGODHA

I.T.A. No.826/IB of 2013, decided on 24th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S.111(4)(b)---Unexplained income or assets---Limitation---Taxpayer contended that order of First Appellate Authority was hit by limitation as provided in subsection (4) of Cl.(b) of S.111 of the Income Tax Ordinance, 2001 and once the time begins to run from a specified date it could not be interrupted or extended unless the legislature makes express provision---Validity---Crux of the matter was limitation which was not considered by both the authorities below---Action of Assessing Officer under S.111(1)(b) of the Income Tax Ordinance, 2001 was barred by time---Orders passed by both the authorities below were set aside by the Appellate Tribunal.

Nagina Silk v. Commissioner Income Tax 1936(sic) PTD 322; I.T.A. No.854/IB of 2012 decided on 5-3-2013 and C.P. No.925 of 2012 rel.

2013 PTD (Trib.) 1684 and 2013 PTD (Trib.) 1159 ref.

Naeem-ul-Haq for Petitioner.

Tahir Khan, D.R. for Respondent.

Date of hearing: 27th February, 2014.

2015 P T D (Trib.) 1618

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Thair Bhatti, Chariman and Abdul Nasir Butt, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-IV, R.T.O.II, KARACHI

versus

Messrs PAK OASIS INDUSTRIES (PVT.) LTD., KARACHI

I.T.As. Nos.789/KB and 949/KB of 2014, decided on 23rd December, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122, 131, 148, 153 & 169---Amendment of assessment---Treating sales of imported plant and machinery and its installation, erection and maintenance as 'Contractual Receipts', liable to tax---Taxpayer, a private limited company engaged in the business of imported plant, machinery and its installation, erection and maintenance, filed income tax return; for tax years which was completed under S.120 of the Income Tax Ordinance, 2001---Subsequently, sales of imported plant and machinery and its installation, erection and maintenance was considered as "contractual receipts", and brought to tax under "Final Tax Regime (FTR)", and further demand was created for said tax years by Taxation Authority---Aggrieved with said treatment, taxpayer filed first appeal before Appellate Authority below, which reversed the treatment meted out in the original orders; and plea of taxpayer was accepted as declared by him in the returns---Validity---Income tax, had been collected under S.148 of the Income Tax Ordinance, 2001 on imported plants/ machinery at the customs stage; and tax so collected was a "final tax" as provided under subsection (7) of S.148 of the Income Tax Ordinance, 2001, read with S.169(2) thereof---Income from imports and sale/supply was one complete transaction; and transaction ended there when the sale was made which could not be taxed again and again---Scheme of the Income Tax Ordinance, 2001 provided that imports and supply was one complete transaction as import was made for subsequent sale and not for retaining by the importer---Purchases made locally and subsequently sold locally or exported, was also one complete transaction for the purpose of taxation---Law had provided protection to the taxpayer that its income should not be taxed twice---Clause (a) of subsection (5) of S.153 of Income Tax Ordinance, 2001, provided that the sale of imported goods would not be subjected to deduction of income tax---Transactions undertaken by taxpayer could not be termed as 'contractual receipts'---Sale of imported machinery and equipment and services rendered with computation of income, could not be equated with value addition, as the importer had no 'know how' and knowledge and technology to make the machinery and equipment amended or make some addition or alteration in the said machinery, as such technology was not available in Pakistan---Imports of the machinery and equipment had been shown in the return correctly in column related to 'Final Tax Regime', and services rendered under 'Normal Tax Regime'---Exclusion provided under S.153(1)(a)(b) of Income Tax Ordinance, 2001, was applicable in the case---Treatment of Assessing Officers bringing the sales of imported machinery and the services rendered under 'contractual receipts' falling in 'First Tax Regime', was not sustainable under the law---Impugned order of Appellate Authority below, rejecting the treatment of the both officers below, were in accordance with law---No exception could be taken to the findings recorded by the Appellate Authority for the tax year in review---Both departmental appeals, were dismissed, in circumstances.

2008 PTD 1243 and 2001 PTD (Trib.) 2969 rel.

Aslam Marri, D.R. for Appellant.

Riaz Hussain Azam Bopera for Respondent.

Date of hearing: 23rd December, 2014.

2015 P T D (Trib.) 1625

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir, Accountant Member

GOHAR RICE MILLS, VILLAGE BADWAL, SHAKARGARRH

versus

COMMISSIONER INLAND REVENUE, SIALKOT

I.T.A. No.2652/LB of 2013, decided on 16th April, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 & 177---Amendment of assessment---Selection of case for audit---Criteria---Interpretation of S.177, Income Tax Ordinance, 2001---Laying down of criteria for selection of any person of his income tax affairs in terms of subsection (1) of S.177 of Income Tax Ordinance, 2001, was an essential pre-requisite for the Commissioner to select a person for audit---Once the Commissioner had selected a case for audit in accordance with the criteria laid down by the Central Board of Revenue in terms of clause (1) of S.177 of Income Tax Ordinance, 2001, the Commissioner could also select a person for audit of his income tax affairs having regard to the factors enumerated in clause (a), person's history of compliance or non-compliance with Income Tax Ordinance, 2001; (b) the amount of tax payable by the person; (c) the class of business conducted by the person---Sub-section (4) of S.177 of Income Tax Ordinance, 2001, would come into play, when the Commissioner in the course of proceedings in the audit of a person under subsection (2) of S.177 discovered that in addition to the selection of person in subsection (2), the Commissioner wanted to select another person for audit of income tax affairs---Subsection (4) of S.177 of Income Tax Ordinance, 2001, in circumstances, was secondary in character in relation to subsections (1) & (2) thereof---If subsection (4) was not capable of being isolated from subsections (1) & (2); clause (d) of subsection (4), could not also be detached from its preceding clauses or subsections---Different clauses of S.177 of Income Tax Ordinance, 2001, were inter-related; and the sequence or order in which same had been mentioned by the Legislature, must be observed by the Executive Authorities in letter and spirit as an obligation, since each clause augmented the other---Clause (d) of subsection (4) of S.177 of Income Tax Ordinance, 2001, could not be isolated from its preceding clauses or subsections in a manner that primary part of S.177 became redundant in view of such isolation thereby paralyzing the main body of the provision in question, in order to make the residual or secondary clause extra-potent---Impugned selection for audit of appellant/ taxpayer's case for audit under S.177(4)(b) of the Income Tax Ordinance, 2001, was illegal and without lawful authority---Same was set aside, which rendered the consequent amended assessment under S.122(1)(5)(i) of Income Tax Ordinance, 2001 to be illegal and was cancelled---Law contained in S.122 of Income Tax Ordinance, 2001, dealt with the rights and procedure together, any amendment therein would be prospective---Impugned amended assessment in respect of tax year 2007, finalized on 28-6-2013 had to be made, if warranted, according to the old provisions of subsection (2) of S.177 of the Income Tax Ordinance, 2001, within five years; after the Commissioner had issued the assessment order, which in the present case was issued on "30-9-2007" and limitation of "five years" ended on 30-9-2012---Impugned amended assessment was adjudged to be time-barred, in circumstances.

2013 PTD 391 ref.

Syed Ali Imran Rizvi for Appellant.

Sajjad Tasleem, D.R. for Respondent.

Date of hearing: 16th April, 2014.

2015 P T D (Trib) 1643

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Tauqeer Akbar, Accountant Member

Messrs KHYABAN PACKAGES, SAMUNDRI ROAD, FAISALABAD

versus

C.I.R. (ZONE-III), R.T.O., FAISALABAD

S.T.A. No.1090/LB of 2014, decided on 11th December, 2014.

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

----Ss. 2(37), 21(2), 33(4) & 73---Sales Tax Rules, 2006, R.7(1)---S.R.O. No.555(I)/2006 dated 2-6-2006---Sales Tax General Order No.35/2012 dated 3-6-2012---Blacklisting of registered person---Appellant/registered person, was blacklisted on allegation that it had violated provisions of S.73 of the Sales Tax Act, 1990 by not declaring its business bank accounts to the department---Condition of issuance of notification, duly published in the official Gazette, was pre-requisite for prescription of procedure for suspension of registration or blacklisting thereon; without which any such prescription made by way of any other instrument, whether a general order, a circular, a directive, an executive order or instruction, could not be deemed to be a statutory regulatory order or a notification---Contrarily, the Federal Board of Revenue had issued General Order, which could not be equated with the statutory regulatory order/notification, which was always issued for regulation of statutory provisions, whereas General Order was issued for administrative purposes---Executive order could not be equated with a notification published in the Official Gazette---Unless a statutory regulatory order/notification was issued and published in the Official Gazette, legal infirmity would prevail---Whole proceedings carried out under General Order, being not in accordance with the provisions of S.21(2) of the Sales Tax Act, 1990 were declared to be illegal and without jurisdiction having no legal effect at all---If a registered person, would violate the provisions of S.73 of the Sales Tax Act, 1990, by not declaring his business bank accounts to the Commissioner concerned, such person would pay only a penalty of five thousand rupees under S.33(4) of Sales Tax Act, 1990; and no adverse action of blacklisting, was warranted under S.21(2) of the Sales Tax Act, 1990---Whole proceedings of blacklisting being illegal and without jurisdiction were infested with inherent legal infirmities, and substantive illegalities tantamounting to patent violation of mandatory statutory provisions---No provisions existed in S.21(2) of the Sales Tax Act, 1990, empowering the tax functionaries to suspend registration or blacklist a registered person, merely due to non-compliance of the provisions of S.73 of the Sales Tax Act, 1990---Non-declaration of business bank accounts by a registered person to the Commissioner concerned could not be termed as "tax fraud" as defined under S.2(37) of Sales Tax Act, 1990 and did not attract the provisions of S.21(2) of the Sales Tax Act, 1990---Action of blacklisting, was an extreme step having paralyzing effect on business of any commercial enterprise and on its financial reputation as well---Such type of action should be taken as last resort after establishing gross violations entailing 'tax fraud' and 'tax evasion'---If the doing of a thing was made lawful in a particular manner, then doing of that in conflict with the manner prescribed, would be illegal and unlawful as per maxim "expressum facit cessare tacitum"---Appellant was not given an opportunity of being heard before passing adverse order of blacklisting of his registration---Due process and right of appellant guaranteed under Constitution, having gravely been prejudiced, issuance of adverse order detrimental to the interest of appellant, was illegal and void in the eye of law---Principles of natural justice had to be applied in all kinds of proceedings, strictly, and departure therefrom, would render all subsequent actions illegal and void in the eye of law---Impugned order, was set aside with direction to restore status of appellant from the date of his registration immediately, in circumstances.

PLD 2011 SC 347; Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605; PLD 1983 Kar. 297; Messrs R.J. Cotton Waste Factory, Faisalabad v. The CIR (Zone-III), (R.T.O.), Faisalabad 2012 PTD (Trib.) 337; Nazir Ahmad Panhwar v. Government of Sindh through Chief Secretary, Sindh and others 2005 SCMR 1814; Hazara (Hill Tract) Improvement Trust through Chairman and others v. Mst. Qaisra Elahi and others 2005 SCMR 678; 2012 SCMR 1235; 2012 CLC 1236 and Government of Sindh through Secretary Agriculture and Livestock Department and others v. Messrs Khan Ginners (Pvt.) Ltd. and 57 others PLD 2011 SC 347 ref.

(b) Constitution of Pakistan---

----Art. 10-A---'Fair trial' and 'due process', as fundamental right of a litigant---Under Art.10-A of the Constitution, 'fair trial' and 'due process' had become a fundamental right of every litigant---Any determination of right of a person falling short of due process and fairness of facts, was illegal and unconstitutional---Any adverse order passed or action taken, or proceedings taken by any forum in violation of 'fair trial' and 'due process' was illegal, null and void.

Babar Hussain Shah and another v. Mujeeb Ahmed Khan and another 2012 SCMR 1235 ref.

Khubaib Ahmad for Appellant.

Javed Iqbal Sheikh, D.R. for Respondent.

Date of hearing: 11th December, 2014.

2015 P T D (Trib.) 1678

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Muhammad Riaz, Accountant Member

ZARAI TARAQIATI BANK LTD.

versus

COMMISSIONER INLAND REVENUE LTU, ISLAMABAD

I.T.As. Nos.188/IB to 190/IB and 282/IB to 284/IB of 2014, decided on 28th May, 2014.

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

----Ss. 122(1), 122(4), 122(5A) & 120(1)---Amendment of assessment---Further amendment---Order was annulled by the First Appellate Authority on the ground that assessment order had already been amended under S.122(1) of the Income Tax Ordinance, 2001 and the order under S.120(1) of the Income Tax Ordinance, 2001 was not in the field---Revenue contended that as per S.122(4) of the Income Tax Ordinance, 2001, the Commissioner was empowered to amend and further amend as many times as may be necessary the original assessment order; and that as order was amended under S.122(5A) of the Income Tax Ordinance, 2001 taking into consideration the earlier amended order, the annulment of the order under S.122(5A) of the Income Tax Ordinance, 2001 by the First Appellate Authority was against the provision of S.122(4) of the Income Tax Ordinance, 2001---Validity---Annulment of the assessment order by the First Appellate Authority was not justified---Appeal of the department against annulment of the assessment order was accepted by the Appellate Tribunal.

2010 PTD 1506 ref.

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

---Ss.21 & 122(5A)---Deductions not allowed---Post-retirement medical benefit---Addition---First Appellate Authority deleted the addition---Revenue contended that instead of providing employee-wise detail of expenses on actual basis, the bank (taxpayer) provided total figure worked out by actuaries---Taxpayer contended that Appellate Tribunal in a reported case 2001 PTD 744 had held that any ascertainable accrued liability was deductible under the mercantile system of accountancy; that liability was not unascertainable liability if the same was stated as provision; and that it was the substance that matters and not the mere nomenclature given to any transaction---Validity---Substance that mattered and not the nomenclature given to any transaction---Liability could not become unascertainable if it was named as provision---Appellate Tribunal directed the department to allow the deduction.

2012 PTR 124; 2001 PTD 1427; 2001 PTD 744 and I.T.As. Nos. 1516 to 1520/KB of 2003 rel.

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

----Ss. 21, 122(5A) & 7th Sched. R.6---Deductions not allowed---Post-retirement medical benefit---Addition---Taxpayer (Bank) contended that addition was not maintainable as the same did not come under the ambit of Seventh Schedule; that business income had to be computed under the Seventh Schedule of the Income Tax Ordinance, 2001 as provided in R.6 to the Seventh Schedule of the Ordinance; and that there was no provision in the Seventh Schedule wherein disallowance of such expenses could be made---Revenue contended that provision for post-retirement medical benefit had been disallowed as the taxpayer failed to file the license of the value company, history of the value company and estimate had been made on the basis of case-law and that First Appellate Authority had deleted the addition without any justification---Validity---Addition under the head "post-retirement medical benefit" made by the assessing officer were not in accordance with settled law---Tribunal directed to delete the addition for the tax year 2010 and order of First Appellate Authority on this issue for the tax years 2011 & 2012 were upheld---Additions in that respect was also not maintainable for the reason that it did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001.

2012 PTR 124 and 2012 PTD (Trib.) 1055 rel.

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

----Ss. 21, 122(5A) & Seventh Sched. R.6---Deductions not allowed---Recoveries of amounts---Addition---Taxpayer contended that addition on account of recoveries was liable to be deleted as that amount related to the period upto tax year 2007; that income was not liable to tax upto tax year 2007; that the issue had wrongly been remanded to the Assessing Officer; that such addition should have been deleted: and apart from this the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001; and that business income had to be computed under the Seventh Schedule to the Income Tax Ordinance, 2001 as specifically provided in R.6 to the said Schedule---Revenue contended that recoveries of charge off amounts had rightly been added in the income of taxpayer as the provisions on account of non-performing loan and advance had been allowed to the taxpayer; and there was no justification for remand of the case---Validity---Assessing Officer had made additions under the head "recoveries" without any evidence/material establishing that recoveries did not relate to the period up to tax year 2007 (up till that time income of the taxpayer was exempt)---Even otherwise, the addition did not come under the ambit of Seventh Schedule to the Income Tax Ordinance, 2001---Appellate Tribunal directed to delete the addition for tax years 2010 & 2011.

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

----Ss. 21(c), 122(5A) & Seventh Sched: R. 6---Deductions not allowed---Commutation to employees---Addition---Assessing Officer observed that "payments were made by the fund itself therefore there seemed no justification in claim of such expense by the company in its account"---Taxpayer contended that it was confronted in another notice that addition was to be made for the reason that expense was of capital nature but while making addition the same had been made on the allegation that tax was not deducted; that it was clear that Assessing Officer alleged three contradictory reasons for disallowance of expense i.e. (i) payment had been made by the fund itself (ii) expense was of capital nature (iii) tax had not been deducted; and such three observations established that Assessing Officer wanted to make an inquiry in order to disallow the expense; that question as to whether tax had been deducted or not was the matter of inquiry which could not be conducted as per law available on the statute book for tax year 2010 and the addition was not maintainable for that reason ; that payment made to the employees working in branches of the Bank (Taxpayer) situated in remote areas and below taxable limit payments were not liable to deduction of tax; that Assessing Officer had not pointed out a single instance wherein tax had not been deducted ; that addition being without any information/material was liable to be deleted; that tax was duly deducted at the time of making the payment; that provision of S.21(c) of the Ordinance were not attracted; that apart from this the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001; and that business income had to be computed under the Said Schedule as specifically provided in its R.6---Revenue contended that the same had been disallowed for the reason that the payment were made by the fund and tax was not deducted and it was also the expenses of capital nature; and that there was no justification for remanding the matter to the Assessing Officer---Validity---Submissions of the taxpayer were correct that Assessing Officer had been changing his contention time and again (payment had been made by the fund itself, expense was of capital nature, tax had not been deducted)---Assessing Officer had been trying to justify addition for one reason or the other---Addition based on the circumstances was not maintainable under S.122(5A) of the Income Tax Ordinance, 2001 which required that Assessing Officer should establish the order to be erroneous and prejudicial to the interest of revenue---Appellate Tribunal directed to delete the addition.

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

----Ss. 34(5), 122(5A) & Seventh Sched. Rr.1, 2---Accrual basis accounting---Taxpayer Bank---Un-paid liability of mark-up---Addition---Remand of case for fresh consideration---Taxpayer contended that computation of income had to be made in accordance with the Seventh Schedule to the Income Tax Ordinance, 1979 from tax year 2009 and onward; that R.2 of the Seventh Schedule of the Income Tax Ordinance, 2001 relating to unpaid liabilities did not allow addition of unpaid mark up; and only unpaid liabilities mentioned in R.1 could be added in the income in the first year following the end of three years; and that as said liabilities were never allowed in R.1, the addition was not maintainable under the law---Revenue contended that liability related to borrowing from State Bank of Pakistan, the markup had not been paid, which attracted provision of S.34(5) of the Income Tax Ordinance, 2001 and addition made in that respect should have been confirmed---Validity---Addition made was beyond the scope of Seventh Schedule and was not in accordance with the settled principles---Appellate Tribunal directed to delete the addition for all the three years.

2012 PTD (Trib.) 1055 rel.

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

----Ss.21(c), 122(5A) & Seventh Sched: R.6---Deductions not allowed---Amortization of deferred income---Addition---Taxpayer contended that it was a grant from Asian Development Bank and grant was not taxable income under the Income Tax Ordinance, 2001; that apart from this the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001; and that business income had to be computed under the Seventh Schedule as specifically provided in R.6 to the Seventh Schedule---Contention of Revenue was that it represented reversal of amortization claimed as deduction in previous years and constituted recouped expenditure; and that the same had rightly been disallowed and there was no justification to remand the matter---Validity---Addition was not maintainable in view of settled law---Even otherwise the addition was beyond the scope of Seventh Schedule to the Income Tax Ordinance, 2001---Addition made was deleted by the Appellate Tribunal for all the years.

I.T.A. No.112/LB/2011 rel.

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

----S. 122(5A) & Seventh Sched. R.1(c)---Amendment of assessment---Tax-payer a Bank---Provision for Non-Performing Loan---Addition---Taxpayer contended that Assessing Officer was informed that the provision had already been added as per computation chart of taxable income and had claimed deduction @ 1% of total advances; that no notice under S.122(5A) of the Income Tax Ordinance, 2001 was issued for the addition; that addition should have been deleted instead of remand; that the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001 and that business income had to be computed under the Seventh Schedule as specifically provided in its R.6---Revenue contended that provision under said head had not been claimed in accordance with R.1(c) of the Seventh Schedule of the Income Tax Ordinance, 2001, the deduction under the head was allowed maximum 1% of the advances and the First Appellate Authority had wrongly remanded the issue to the Assessing Officer---Validity---Provision on account of "Non-Performing Loan and Advances" had already been added in taxable income in accordance with R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001 and 1% of the total advances had been claimed as deduction by the taxpayer---Addition made was not in accordance with the settled law---Addition was ordered to be deleted by the Appellate Tribunal for all the three years.

2012 PTR 124 rel.

Commissioner of Income Tax Special Zone Corporate Region, Karachi v. Shaista Estate (Pvt.) Ltd. 2010 PTD 704 and I.T.A. No.1468/LB of 2009 ref.

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

----Ss. 111, 70, 122(5A) & Seventh Sched. R.9---Un-explained income or assets---Recouped expenditure---Reversal against provision---Assessing Officer had observed through Show Cause Notice that "reversal of provision claimed during previous year stood allowed to the company as deductions against income for previous years; and since these amounts had been reversed in the accounts, the same should have been offered for tax as recouped expense as the same was taxable as recoveries or reversals of earlier deductions that were taxable in accordance with S.70 of the Income Tax Ordinance, 2001 read with R.9 of the Seventh Schedule to the Income Tax Ordinance, 2001; and reversals of provision was liable to be added to balance of income for the year"---Taxpayer contended that provision was made on client to client basis, in one case there may be reversal of provision but in another case provision was required to be made as required under Prudential Regulations issued by the State Bank of Pakistan; that net amount was claimed as expense in profit and loss account which had duly been added back and offered for taxation at the time of filing of return in accordance with Seventh Schedule to the Income Tax Ordinance, 2001; that provision of Non-Performing Loan had never been claimed in profit and loss account as well as computation of taxable income; that there was no error in financial statements, the provision of S.111 of the Income Tax Ordinance, 2001 was not applicable; that the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001: and that business income had to be computed under the Seventh Schedule as specifically provided in its R.6---Revenue contended that the claimed reversal had not been offered for taxation as recouped expenses as per audited accounts and the same were taxable as recoveries or reversals of earlier years deductions that were taxable in accordance with S.70 of the Income Tax Ordinance, 2001 and that First Appellate Authority was not justified to remand the issue to the Assessing Officer---Validity---Reversal against provisions had not been claimed as deduction by the taxpayer---Addition made by the Assessing Officer was not in accordance with settled law and the addition was deleted by the Appellate Tribunal.

2012 PTR 124 rel.

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

----S. 122(5A) & Seventh Sched: R.6---Amendment of assessment---Provision against other assets---Addition was made by the Assessing Officer on the ground that said amount represented reversal of provisions claimed as deduction in previous years and constituted recouped expenditure---Taxpayer contended that expense had not been claimed as reversal made during the year; that provision against other assets had already been allowed by the Appellate Tribunal in the tax years 2006 & 2007; that the order was neither erroneous nor prejudicial to the interest of revenue; that apart from this the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001; and that business income had to be computed under the Seventh Schedule as specifically provided in its R.6---Validity---First Appellate Authority deleted the addition in the tax year 2012 placing reliance on the decision of Appellate Tribunal for the tax years 2006 & 2007---No interference was required in the order on the issue as the Revenue was unable to distinguish the case from those years---Addition made in that respect for the tax year 2010 was also deleted.

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

----Ss. 34(3), 122(5A) & Seventh Sched: Rr.1 & 2---Accrual basis accounting---Impairment loss---Disallowance on the ground that a person shall incur expenditure when it was payable by the person and as per subsection (3) of S.34 of the Income Tax Ordinance, 2001 such amount shall be payable when all events with determined liability had occurred and the amount of liability could be determined with reasonable accuracy; and provisions under reference did not clarify such condition and was notional and could not be allowed---Taxpayer contended that impairment had rightly been claimed under S.34 of the Income Tax Ordinance, 2001; that addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001; and that business income had to be computed under its R.6---Validity---Held, that contentions of the taxpayer were reasonable and addition was deleted.

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

----Ss. 70, 122(5A) & Seventh Sched: R.6---Recouped expenditure---Reversal of provision against other assets on the ground that the amount represented reversal of provisions claimed as deduction in previous years; and constituted recouped expenditure---Taxpayer contended that expense was not claimed for tax year 2011 on account of provision but offered for tax during the year under the head other income" and that the addition was not maintainable as the same did not come under the ambit of Seventh Schedule of the Income Tax Ordinance, 2001: and business income had to be computed as specifically provided in R.6 of said schedule---Validity---As the reversal of provision against other assets had not been claimed as deduction by the taxpayer and the issue had already been decided in the previous years i.e. 2006 & 2007 by the Appellate Tribunal, the addition made was deleted by the Appellate Tribunal.

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

----Ss.21(c), 122(5A) & Seventh Sched. R.6---Deductions not allowed---Property income---Provision against non-performing loans---Sub-standard loans---Surcharge amount---Issues were remanded back to the Assessing Officer assuch those were required further adjudication, clarification and evidence to be placed on record---Assessing Officer was directed to pass fresh order in respect of said issues after affording reasonable opportunity of being heard to the taxpayer.

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

----Ss.21(g), 122(5A) & Seventh Sched. R.6---Deductions not allowed---Penalty paid to State Bank of Pakistan---Addition---Validity---Addition was upheld as it was inadmissible under S.21(g) of the Income Tax Ordinance, 2001.

Iqbal Hashmi and Qadeer Ahmed ITP for Appellant (in I.T.As Nos. 188/IB to 190/IB of 2014).

Said Munaf, D.R. for Respondent (in I.T.As Nos. 188/IB to 190/IB of 2014).

Said Munaf, D.R. for Appellant (in I.T.As Nos. 282/IB to 284/IB of 2014).

Iqbal Hashmi and Qadeer Ahmed ITP for Respondent (in I.T.As Nos. 282/IB to 284/IB of 2014).

Date of hearing: 28th May, 2014.

2015 P T D (Trib.) 1720

[Inland Revenue Appellate Tribunal]

Before Munsif Khan Minhas, Judicial Member and Asad Ali Jan, Accountant Member

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

versus

Messrs NERA ASA, ISLAMABAD

S.T.A. No.215/IB of 2011, decided on 4th April, 2012.

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

----Ss. 11, 25, 36 & 46---Recovery of amount on the allegation of suppression of sales and adjustment of inadmissible input tax---Respondent, a foreign taxpayer company, having a branch office in Islamabad, dealing in execution of contracts for supply, and installation of telecommunication equipment along with providing of training and engineering services---Assistant Commissioner, had ordered the company to pay amount on account of alleged suppression of sales and inadmissible input tax---Appellate authority annulled the order-in-original legal grounds---Validity---Appellate authority found that business of respondent company, was contracts for completion of projects on 'turnkey' basis and not of supplies; that as a result, all the receipts of the respondent company, except those forming part of the contract to the extent of material or equipment supplied, respondent company, had been held as not chargeable to tax---Amount received by the respondent company from its Head Office as Commission, and on account of services, had also been declared as not chargeable to sales tax---Findings of Appellate Authority on that issue, were not contested by the department---Findings of appellate authority, in circumstances had attained finality---Representative of the department had not been able to put forth any plausible argument or material in support of the contention that amounts mentioned were sales chargeable to sales tax---Neither any details could be provided, nor the nature of such receipts had been explained by the representative of the department---Representative also failed to establish that amount received from execution of contract on 'turnkey' basis, particularly parts comprising of services, were supplies chargeable to sales tax---No argument had been put forth by the representative to establish that how the amount received by respondent company as Commission and services from its Head Office, could be treated as sales chargeable under Sales Tax Act, 1990---Findings of Appellate authority that in case the sales tax, was not leviable on the total value of contract as a whole, executed for completion of project; and that sales tax could only be charged to the extent of value of material, or equipment supplied by the company, stood confirmed, in circumstances---Findings of appellate authority, that amount received by respondent company from its own Head Office as Commission, and for service rendered, could not be treated as "sales" for the purpose of charge of tax, also stood confirmed---Appellate authority, had rightly found that in addition to show-cause notice issued under S.36 of Sales Tax Ordinance, 1990, another notice, was also required to be issued before passing of order under S.11 of Sales Tax Act, 1990---Both provisions i.e. Ss.11 and 36 of Sales Tax Act, 1990, expressly provided for issuance of show-cause notice before institution of proceedings---Case was not that of mentioning of S.11 expressly on the face of only show-cause notice, but was a case of non-issuing of notice under S.11 of Sales Tax Act, 1990 before passing the order under said section---Order of appellate authority to declare the proceedings as well as order-in-original as illegal because of having been passed without assumption of jurisdiction, was upheld, and maintained, in circumstances.

Messrs Tarbella Cotton and Spinning Mills (Pvt.) Ltd. v. Additional Collector of Sales Tax, Peshawar 2006 PTD (Trib.) 2533; 2005 PTD 480 (SCPAK); 2006 PTD (Trib.) 2533; 2007 PTD 2265 and 2009 PTD (Trib.) 500 ref.

(b) Interpretation of statutes---

----Words and phrases used in statute of which no specific definition was provided therein, would have common and ordinary dictionary meanings.

Akhtar Anjum, D.R. for Applicant.

Atif Waheed for Respondent.

Date of hearing: 4th April, 2012.

2015 P T D (Trib.) 1777

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs ARIF EHSAN PRINTERS

versus

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

M.A. (AG) Nos.9/LB, 10/LB of 2014, and S.T.A. No.733/LB of 2013, decided on 17th April, 2014.

(a) Interpretation of statutes---

----Taxing statute---Construction---Principles---Plain words and patent meanings of law, were to be applied and interpreted as they were, and no latent meanings were to be attached to the patent words which convey the plain and obvious meanings---One had to look at the taxing statute merely at what was clearly said; no room existed for any intendment; no equity about a tax; no presumption as to tax; nothing was to be read in, nothing was to be implied and one could only look fairly at the language used---In construing fiscal statute, and in determining the liability of a subject to tax, one must have regard to the strict letter of the law, and not merely to the spirit of the statute, or the substance of the law---If the Revenue would satisfy the court that the case fell strictly within the taxing provisions of the law, the subject could be taxed---If on the other hand, case was not covered within the four corners of the provisions of the taxing statute, no tax could 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---When it was desired to impose a new burden by way of taxing it was essential that said intention should be stated in plain terms---Court could not assert to the view that, if a section in a taxing statute was of doubtful and ambigious meaning, it was possible out of that ambiguity to extract a new and added obligation, not formerly cast upon the taxpayer.

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

----S. 11---Assessment---Issuance of notice---Conditions---Provisions of S.11 of Sales Tax Act, 1990, stipulated different conditions for issuance of notice under S.11, firstly, the registered person failed to file the return, secondly, the registered person had not paid the tax due on supplies, or made short payment, or had claimed input tax credit or refund which was inadmissible; thirdly, specific charge of "collusion or deliberate act" was levelled in the subject show-cause notice and fourthly, any inadvertence, error or mis-constructions, any tax or charge had not been levelled---In absence of any details or proper allegation regarding the said situations, assessment was made under S.11(2)(3)(4)(5) of Sales Tax Act, 1990, and there were reasons to believe that any of the aforementioned defects existed in assessment of tax---Notice issued to registered person under S.11 of Sales Tax Act, 1990, did not indicate as to under what subsection of S.11, notice had been issued---Notice, prima facie, was defective and the error was not curable, as it did not indicate the reasons to re-assess the already assessed tax in the hands of the registered person, impugned show-cause notice being illegal ab initio, proceedings initiated on the basis of said notice were set aside, in circumstances.

PTCL 2011 CL 788(sic); 2012 PTD (Trib.) 453; 2013 PTD 1536 and 2012 PTD 1815 ref.

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

----Ss. 3, 11, 25, 46 & 72-B---Assessment of tax---Conduct of audit---In the present case, Authority had conducted audit of appellant/registered person under S.25 of the Sales Tax on its own, without any prior selection from the Federal Board of Revenue, on the basis of random or parametrict criteria under S.72-B 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 same, would have to fall on the ground automatically and whatever proceedings in its consequences, in the shape of any show-cause notice or adjudication order, or appellate order, or even recovery notice, would also become illegal, unlawful and without jurisdiction---No provision existed in the Sales Tax Act, 1990 for undertaking any such reconciliation outside the ambit of "audit proceedings" under S.25 of the Sales Tax Act, 1990---Provisions regarding selection of audit by the FBR, 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.

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

----Ss. 3, 11, 21 & 46---Scope of tax---Assessment of tax---Declaration of supplier as blacklisted---Order-in-original, was passed in the case much after the tax period three years after the supplier unit was declared blacklisted---Department was not within the ambit of law while passing the order against the appellant/registered person for the reason that the supplier was blacklisted---Supplier in question was operative during the period when the business/transaction took place---Both the orders, and show-cause notice, were declared to be illegal, void and without lawful authority and legal impropriety---All orders, being illegal were set aside---Departmental appeal was dismissed being without merits, and appeal of registered person, was disposed of accordingly.

2005 SCMR 492 ref.

Muhammad Imran Rashid and Attiq-ur-Rehman, ITP for Appellants (in M.A. (AG) Nos. 9/LB, 10/LB of 2014 and S.T.A. No.733/LB of 2013).

Sajjad Tasleem, D.R. for Respondent (in M.A. (AG) Nos. 9/LB, 10/LB of 2014 and S.T.A. No.733/LB of 2013).

Sajjad Tasleem, D.R. for Appellant (in S.T.A. No.822/LB of 2013).

Muhammad Imran Rashid and Attiq-ur-Rehman, ITP for Respondents (in S.T.A. No.822/LB of 2013).

Date of hearing: 17th April, 2014.

2015 P T D (Trib.) 1805

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

C.I.R., ZONE-VII, R.T.O., LAHORE

versus

Messrs T.U. PLASTIC INDUSTRIES CO., LTD., LAHORE

S.T.A. No.573/LB of 2013, decided on 10th December, 2014.

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

----Ss. 7, 8, 11, 33, 34, 46 & 73---Inadmissible transactions---Recovery of Input tax---Departmental appeal---Assessing Authority observed that respondent/registered person having not made payments to the different supplier units, had violated the provisions of S.73 of Sales Tax Act, 1990 and ordered the recovery of input tax along with default surcharge and penalty---Appellate Authority had observed that respondent/registered person had neither applied for wrong adjustment of input tax, nor had claimed input tax against fake/flying invoices; nor he had caused any financial loss to the Government Exchequer---Appellate Authority had held that denial of such input tax, would tantamount to double taxation---Appellate Authority, directed to allow input tax adjustment and dropped allegations against respondent/ registered person---Validity---Registered person company had provided relevant record of transfer of payments from record to the Bank accounts of the supplier units---In some cases, there was only a default of payment of amount paid beyond 180 days which delay was condoned being procedural in nature---Appellate Authority, therefore, had rightly directed to allow input adjustment and droped the allegation of non-compliance of the provisions of S.73 of Sales Tax Act, 1990---No reason existed to disturb the order of Appellate Authority, which was maintained.

2010 PTD (Trib.) 2345 rel.

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

----Ss. 7(1), 8(1)(b), 11, 33, 34, 46 & 73---S.R.O. No.490(I)/2004 dated 12-6-2004---Inadmissible transaction---Input tax adjustment, denial of---Departmental appeal---Assessing authority in the impugned order had held that respondent/registered person (company) had claimed inadmissible input tax and had violated the provisions of S.8(1) of the Sales Tax Act, 1990---Tax charged against the said allegation, was directed to be dropped by Appellate Authority in the light of provisions of S.7(1) of Sales Tax Act, 1990---Validity---Input tax adjustment on furnace oil and cement etc., being not disallowable under S.R.O. No.490(I)/2004, dated 12-6-2004 no justification existed for denial of input tax, which was allowable in terms of S.8(1)(b) of the Sales Tax Act, 1990---No reason being to disturb the order of Appellate Authority, same was maintained, in circumstances.

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

----Ss. 7, 8, 11, 33, 34, 46 & 73---Inadmissible transactions---Difference in stocks---Recovery of Sales Tax along with default surcharge and penalty---Assessing Authority detected that there was difference in stocks as per inventory and annual audited account for the relevant tax year---Sales tax amounting to Rs.2,391,410 was found recoverable along with default surcharge and penalty---Appellate Authority deleted said addition---Registered person (company) explained that his audited accounts, raw material, work-in-process and finished goods collectively having represented the stock in trade, there was no difference in stocks, rather it was only the methodology or audit parameters adopted by the auditors for understanding fair and true picture of the audited accounts---No exception, could be taken to the treatment, as accorded by Appellate Authority, who after taking into consideration all aspects of the case had directed to drop the allegation, and deleted the sales tax---Order of Appellate Authority was maintained by the Tribunal being in accordance with law and facts of the case.

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

----Ss. 8, 11, 33, 34, 46 & 73---Inadmissible transactions---Input tax claim on plant and machinery---Denial of claim---Registered person/ company, imported machinery for the business purposes, and paid sales tax at import stage, which was claimed by company as input tax---Same was disallowed by the Assessing Authority on the plea that the plant and machinery in question, were not used for the purpose of manufacturing of artificial leather, which was the principal activity---Appellate Authority vacated that order of the Assessing Authority---Validity---Appellate Authority while vacating the order of Assessing Authority, had observed that the machinery imported, was duly installed at the business premises of the company; and machinery so installed was directly producing goods for taxable supplies as per provisions of S.8 of Sales Tax Act, 1990---No reason existed to disturb the order of Appellate Authority which was found to be in accordance with law; and was supported by judgment reported as 2002 PTD (Trib.) 111---Order of Appellate Authority was maintained by the Tribunal in circumstances.

Messrs Sheikh Spinning Mills Ltd.,'s case 2002 PTD (Trib.) 111 rel.

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

----Ss. 7, 8, 11, 22, 23, 26, 33, 34, 46 & 73---S.R.O. No.509(I)/2007, dated 9-6-2007---Recovery of input tax along with default surcharge and penalty---Assessing Authority observed that registered person, had not provided the complete addresses, contact numbers and payment proof of the buyers to whom the supplies had been made to get the benefit of refund---Output tax, which was not charged on the supplies made by the registered person, was found recoverable along with default surcharge and penalty---Appellate Authority deleted the demand---Validity---Registered person/company had explained that all the supplies were genuine and fulfilled requirements of Ss.22, 23, 26 & 73 of the Sales Tax Act, 1990 and contended that since the supplies had been zero rated as declared by FBR vide S.R.O. No.509(I)/2007, dated 9-6-2007, but the department charged Sales Tax at 16%---No exception could be taken to the treatment (deletion of demand) as accorded by Appellate Authority, which was found to be in accordance with law, and also consistent with the different SROs issued by FBR in that regard---Order of Appellate Authority, needing no alteration/ modification, was maintained by the Tribunal in circumstances.

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

----Ss. 7, 8, 11, 33, 34, 46 & 73---FBR letter C. No. 3(36) dated 14-7-2004---Payments not received against supplies---Input tax adjustment, recovery of---Department had observed that the registered person had not provided proof of receipts against supplies and as per audited accounts the debtors and creditors had been increased---Inference was certain payments were not received or paid against the supplies---Input tax adjustment was disallowed, and found recoverable from the registered person---Appellate Authority found that S.73 of Sales Tax Act, 1990 and FBR's letter C. No.3(36) dated 14-7-2004 provided that S.73 did not apply to the imports and exports, purchases and sales to unregistered person---Liability credited thereunder was deleted by the Appellate Authority---Appellate Authority had acted in accordance with law---Tax charged on the basis that creditors and debtors were increased, was unlawful and against the facts of the case---Department having failed to make out a case that the order of Appellate Authority needed modification, same was maintained, in circumstances.

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

----Ss. 8, 11, 33, 34, 38, 40 & 46---Difference in stocks---Recovery of sales tax along with default surcharge and penalty---Assessing Authority had observed that as per audit account, the taxpayer had declared closing stock at Rs.283,127,137, whereas on physical verification there was no stock found at the premises; accordingly sales tax amounting to Rs.48,131,613, was found recoverable along with default surcharge and penalty---Appellate Authority had found that no evidence was brought on record in terms of S.38 of the Sales Tax Act, 1990 to substantiate the claim that there was no stock available at the premises; that the department functionaries visited the premises of the registered person without complying with the provisions of Ss.38 & 40 of the Sales Tax Act, 1990 and that department acted beyond jurisdiction---Appellate Authority deleted the tax demand in that regard---Validity---Department while taking alleged stock-taking, had not acted in accordance with the provisions of Ss.38 & 40 of the Sales Tax Act, 1990---Appellate Authority was justified to observe that functionaries of the department acted beyond jurisdiction---No reason existed to disturb the order of Appellate Authority, which was maintained---Departmental appeal being filed, without any merits or substance was rejected by Appellate Tribunal, in circumstances.

PTCL 1999 CL 803 rel.

Dr. Javed Iqbal Sheikh, D.R. for Appellant.

Tahir Mehmood and Miss Sumaira Khurshid for Respondent.

Date of hearing: 10th December, 2014.

2015 P T D (Trib.) 1839

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Tauqeer Akbar, Accountant Member

Messrs AHSAN ENTERPRISES, ABDULLAHPUR, FAISALABAD

versus

C.I.R.(A), FAISALABAD and others

S.T.A. No.1148/LB of 2014, decided on 11th December, 2014.

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

----Ss. 11(2)(3) & 46---Recovery of erroneously refunded amount of sales tax---Appellant/registered person as per report of audit team of post refund audit, had illegally received refund of input tax on the strength of invoices allegedly issued by suspended/blacklisted units---Adjudication proceedings were initiated by the Taxation Officer by way of issuance of show-cause notice for recovery of already refunded amount of sales tax under S.11(2) of Sales Tax Act, 1990---Said adjudicating proceedings culminated into passing of impugned order by Adjudicating Officer, which was upheld in appeal by Appellate Authority---Validity---Impugned show-cause notice and consequent adjudication order passed under S.11(2) of Sales Tax Act, 1990, were illegal, void ab initio and without jurisdiction, as recovery of erroneously refunded amount of sales tax, could be made under the provisions of S.11(3) of Sales Tax Act, 1990, whereas assessment of tax liability not paid or short paid was provided under S.11(2) of Sales Tax Act, 1990---Present case was neither case of assessment of tax on the basis of any short payment nor of non-payment---Assumption of jurisdiction under S.11(2) of Sales Tax Act, 1990, by way of issuing subject show-cause notice and passing adjudication order for recovery of erroneously refunded amount of sales tax, without invoking mandatory provisions of S.11(3) of Sales Tax Act, 1990, were illegal and without jurisdiction---If the law had enacted that certain action should be taken in a certain manner and in no other manner, such requirement was absolute and non-compliance would invalidate the whole proceedings---If the doing of a thing was made lawful in a particular manner, then doing of that thing in conflict with the manner prescribed, would be illegal and unlawful as per maxim "Expressum facit cessare tacitum"---Impugned orders passed by authorities below, were vacated by Tribunal being devoid of legal substance.

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

----S. 72---Powers of officers of sales tax---Officers of sales tax to follow Board's orders---Officers of sales tax or other persons employed in the execution of Sales Tax Act, 1990, were not empowered under the law to raise any objection to the clarifications, circulars, instructions, directions, orders and guidelines issued by the Federal Board of Revenue from time to time, and were legally bound under S.72 of the Sales Tax Act, 1990 to follow and implement the same; as those carrying finding force, could not be disregarded by the field formations on one pretext or the other---In order to maintain better discipline, the subordinate officers should not venture to circumvent or flout the instructions and directions of the Board---Clarifications, circulars, instructions, directions, orders and guidelines of the Board, being the highest administrative authority in the tax administration of the Federation, were binding on all its subordinate authorities in terms of S.72 of Sales Tax Act, 1990.

Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, South Zone, Karachi and others 1992 PTD 1 = 1992 SCMR 250; The Collector of Customs (Appraisement) Customs House, Karachi v. Messrs Civil Aviation Authority, Karachi and another 2004 PTD 3005; The Commissioner (Legal) Inland Revenue v. Messrs E.F.U. General Insurance Ltd. 2011 PTD 2042; "The Central Insurance Company v. CBR 1993 SCMR 1232 and The CIT v. Muslim Commercial Bank Ltd. 2002 PTD 720 ref.

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

----S. 11---Constitution of Pakistan, Art.13---Issuance of second show-cause notice---Protection against double punishment/double jeopardy---Issuance of second show-cause notice regarding the same tax period, would amount to imposition of double taxation; and double jeopardy, which could not be given legal credence, but also would offend and defy the fundamental rights set out in Art.13 of the Constitution; which provided that no person would be prosecuted, or punished for the same offence more than once---Doctrine of "double jeopardy" which corresponded to the principle of "autre fois acquit and autre fois convict" always prohibited, duplicate trial and duplicate punishment for the same offence---'Second show-cause notice', adjudication order and appellate order in presence of the 'first' appellate order to the same person, for the same charges against invoices of same supplier involving same amount of tax concerning the same offence, was not only illegal, unlawful and devoid of any merits, but also would amount to double jeopardy in defiance of principles of natural justice---Re-agitating of the same issue by the tax functionaries was against all the principles of administration of justice and fair play---In the presence of earlier order of appellate authority, another order of adjudicating authority and appellate authority, was contrary to the first orders to hold the field, for the same reason that two contrary orders could not exist at one and the same time---No one could be condemned and punished twice on the same cause of action and offence---Order accordingly.

Khubaib Ahmad for Appellant.

Javed Iqbal Sheikh, D.R. for Respondents.

Date of hearing: 11th December, 2014.

2015 P T D (Trib.) 1847

[Inland Revenue Appellate Tribunal]

Before Javaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

I.T.As. Nos. 375/LB to 379/LB of 2013, decided on 12th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 21, 131, 161, 162, 174(3), 177 & 205---Withholding obligations of taxpayer---Compliance---Belated orders of Taxation Officer---Effect---Taxation Officer, issued notice to taxpayer to submit necessary details/evidence to show compliance with his withholding obligations regarding tax years 2003, 2004, 2005 & 2006---Taxation officer thereafter passed orders under Ss.161 & 205 of Income Tax Ordinance, 2001 wherein the taxpayer was held defaulter---Appellate Authority, on appeal allowed relief to taxpayer setting aside impugned order of Taxation Officer, but despite that remanded the matter to Taxation Officer for adjudicating the same afresh in the light of observation, recorded in the impugned order---Validity---Under provisions of S.174(3) of Income Tax Ordinance, 2001, proceedings were to be taken within 5 years---Proceedings in the cases for tax years 2003, 2004, 2005 & 2006, (having been taken in the year 2012), being time barred were ab initio void and illegal---Remand of case in a casual manner, had always been deprecated by superior judiciary, on the ground that same tantamount to provide Tax Authorities with an opportunity to fill in legal lacunas, and deficiencies, which was not lawful---Remand order should be avoided, unless exceptional circumstances, warranted the same---Directions of first Appellate Authority to remand the matter, were unlawful---Not only the Taxation Officer had transgressed the lawful mandate in concluding proceedings under S.161 of Income Tax Ordinance, 2001, but also the first Appellate Authority fell in grave error by remanding the matter for adjudication afresh---Orders of both authorities below were vacated being unlawful and unjustified. Appeal accepted.

Habib Bank Ltd. v. Federation of Pakistan 2013 PTD 1659; 2012 PTD (Trib.) 122; 2014 PTD (Trib.) 1400; 2014 PTD (Trib.) 1542 and 2015 PTD (Trib.) 654 ref.

Asim Zulfiqar Ali FCA for Petitioner.

Tariq Javid, D.R. for Respondent.

Date of hearing: 12th June, 2014.

2015 P T D (Trib.) 1886

[Inland Revenue Appellate Tribunal]

Before Ghulab Shah Afridi, Member (Judicial)

MUHAMMAD INAM and others

versus

ADDITIONAL COLLECTOR (ADJUDICATION) and another

Customs Nos.20/PB and 21/PB of 2014, decided on 10th December, 2014.

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

----Ss. 32, 32(3) & 156(1)(14)---Show-cause notice, essentials of---Contention of importer was that department had failed to specify nature of act and its character in order to implicate him and to bring his conduct within fold of S. 32, Customs Act, 1969 of Customs Act, 1969---Validity---In order to attract S. 32 and to bring an act within fold of S. 156(1)(14) of Customs Act, 1969, it was necessary, to make any declaration, notice, certificate or other document; to sign any declaration; to cause to be made or sign any declaration etc.; to deliver or cause to be delivered any declaration to an officer of department and to make any statement in answer to any question put to importer by an officer of the department, which he was required by or the Customs Act, 1969 to answer---Court was also to judge as to whether on the basis of submission of documents or in the light of admitted facts relating to customs transactions conducted by importer was an act which could be termed as an inadvertence, error or misconstruction in material particular---Only charge against importer was that he filed GD and value of optional accessories fitted at time of manufacturing had not been assessed---No charge existed to the effect that his declaration in respect of nature, description and origin of vehicle was found to be wrong---Statement made in customs documents regarding nature and description of goods imported were not in any way wrong---Issuance of show-cause notice under S. 32(3) of Customs Act, 1969 was ab initio wrong as no untrue statement, inadvertence, error or misconstruction was ever made either by importer or by the Agent.

Pakistan v. Public at Large PLD 1987 SC 304; Ali Haider v. Ijaz Hussain Malik and others 1968 PCr.LJ 127; Collector of Customs (Preventive) Karachi v. Pakistan State Oil Karachi 2011 SCMR 1279 = 2011 PTD 2220 and 2001 SCMR 838 ref.

DG Khan Cement Lahore v. Collector of Customs, Sales Tax and Central Excise Multan 2003 PTD 1797 rel.

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

----Ss. 207,208 & 209---Liability of Agent---According to sections 207, 208 and 209 of Customs Act, 1969, an agent represented his principal and he could not be declared as responsible for loss unless by direct evidence it could be shown that he was committing some activity by which State suffered loss in public finance.

Federation of Pakistan through Secretary of Finance v. Messrs Ibrahim Textile Mills Ltd. and others 1992 SCMR 1898 rel.

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

----Ss. 79 & 80---Goods declaration, assessment of---Sections 79 & 80 of Customs Act, 1969 revealed that importer or his Agent had to file a bill of entry for release of goods on which department had to make an assessment---Any claim made by an importer was subject to scrutiny by department vested with unfettered powers to complete an assessment---Claim was a request subject to approval by competent authority---Where competent authority granted or rejected claim, no charge of fraud or otherwise could be linked to Agent or to his principal whose duty was to submit relevant documents for processing of release application.

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

----S.32---Untrue statement inadvertence, error or misconstruction---Prosecution, if wanted to rope in the Agent, it must prove by some cogent reasons that Agent was an associate of those who were guilty of making an untrue statement, inadvertence, error or misconstruction before Department.

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

----S. 180---Issuance of show-cause notice before confiscation of goods---Show-cause notice did not reveal the grounds or cause against Agent---Show-cause notice only addressed grievance of department and that too against the importer---Validity---Section 180 of Customs Act, 1969 laid down a mandatory duty for the department to issue a show-cause notice before imposition of penalty---Show-cause notice did not reveal grounds or cause against an Agent---Initiation of action against agent was in violation of S.180 of Customs Act, 1969.

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

----S. 25A---Determination of customs value---Contention of importer was that S. 25A of Customs Act, 1969 conferred powers upon Director Valuation for determination of customs values of imported goods and by exercising such powers by Director Valuation had allowed 20% discount on account of local taxes/commission at time of determination of customs value of different types of vehicles on the ground that it was in line with long standing assessment practice---Importer's plea was that department had refused to provide similar treatment to vehicle imported by him---Validity---Powers conferred by statute could not be curtailed by an executive order unless statute itself permitted so---Paramount responsibility of department was to ensure that there was no injustice or discrimination involved in working of such assessment.

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

----S. 24A---Speaking order, ingredients of---Order passed by department was sketchy, slip-shod and devoid of reasons---Said order was not at all a speaking order and could not be called a quasi-judicial order within parameters set up by law---Tenor of order amply manifested non-application of judicial mind and no reasons had been assigned by department while coming to conclusions---Executive authority, as per S.24A of General Clauses Act, 1897, was supposed to give reasons for making the order---Quasi-judicial order must be a speaking order manifesting that department had applied its judicial mind to the issues---Order which was not a speaking order and devoid of reasons was not sustainable in law.

Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC (Pak) 272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan and others PLD 1970 SC 173 and Airport Support Services v. Airport Manger 1998 SCMR 2268 rel.

PLD 1964 SC 536; 2003 SCMR 1505; 2006 SCMR 129 and United Refrigeration Industries (Pvt.) Ltd. v. Federation of Pakistan 2000 CLC 1660 ref.

Aamir Bilal for Appellants.

Hamid Pervez Superintendent, Pir Mushtaq Hussain and Javed Iqbal for Respondents.

Date of hearing: 26th November, 2014.

2015 P T D (Trib.) 1926

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs CH. MUSHTAQ AND CO., JAIL ROAD, SIALKOT

versus

C.I.R, R.T.O., SIALKOT

MA(Stay) No.827/LB of 2014 and I.T.A. No.1845/LB of 2012, decided on 14th July, 2014.

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

----Ss. 113, 114, 120, 122 & 221---Filing of return of income---Assessment---Rectification proceedings---Scope---Taxpayer who was deriving income from distribution of products of principal companies, filed return of income for relevant year declaring his income, which was deemed to be treated as an assessment in terms of S.120 of the Income Tax Ordinance, 2001---Subsequently rectification proceedings were initiated under S.221 of the Income Tax Ordinance, 2001, by issuing show-cause notice alleging therein that the taxpayer had failed to deposit the tax required under S.113 of the Income Tax Ordinance, 2001---Taxpayer filed reply to the show-cause notice and also revised the return of income, but department rejected submission of the taxpayer as well as revision of the return, and assessment order, issued under S.120 of the Income Tax Ordinance, 2001, was rectified under S.221 of the Ordinance---Appellate Authority dismissed appeal of the taxpayer---Validity---Issue requiring consideration and adjudication was as to whether the order passed under S.221 of the Income Tax Ordinance, 2001 was beyond the scope of rectification---Only those mistakes could be rectified which were apparent and floating on the face of record/return---Error of law or fact, having direct nexus with the question of determination of rights of parties affecting their substantial rights, or causing prejudice to their interest, was not a mistake apparent on record to be rectified under S.221 of the Income Tax Ordinance, 2001---Mistake must be of the nature which was floating on the surface of record; and must not involve an elaborate discussion or detailed probe/inquiry or process of determination in the light of amendment, law or fact---Determination of minimum tax liability, was a material question which could not be brought within the purview of S.221 of the Income Tax Ordinance, 2001 for the purpose of rectification---Department/Revenue Authority carried on amendment in the garb of rectification, which could not be endorsed as being legally sacrosanct---Matter in issue, in circumstances, fell outside the scope of rectification---Adjudicating Authority had unlawfully enlarged the scope of S.221 of the Income Tax Ordinance, 2001 to the extent of erroneousness and prejudicial to the interest of Revenue as provided under S.122 of Income Tax Ordinance, 2001---Rectification order, was annulled, in circumstances.

Messrs Allied Marketing (Pvt.) Ltd. and others's case I.T.As. Nos. 1293-1296 and 1578/LB of 2011; 2004 PTD (Trib.) 2491; 2008 SCMR 204 = 2008 PTD 253; 2011 PTD (Trib.) 901; 2009 PTD (Trib.) 521; 2013 PTD 508 (H.C.S.); 2012 PTD (Trib.) 170; 2011 PTD (Trib.) 2026; 2013 PTD (Trib.) 1749; I.T.As. Nos. 463, 464/LB of 2010 dated 1-12-2011; I.T.As. Nos. 1, 2/IB of 2014 dated 14-3-2014; 2006 PTD 1699; I.T.A. No. 238/LB of 2003 dated 16-8-2004; I.TAs. Nos. 4469-4470/LB of 2002 dated 6-5-2004 and 2003 PTD 869 ref.

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

----Ss. 114(6), 120, 122(3) & 221---Revised return of income---Rejection and rectification of original return---Issue for consideration and adjudication was as to whether Adjudicating Authority was justified in rejecting the revised return and rectify the original return in presence of revised return/deeming order under S.122(3) of Income Tax Ordinance, 2001---Original return in the present case, was revised prior to the rectification order---Adjudicating Authority had not accepted the same having not been filed in accordance with the provisions of S.114(6) of the Income Tax Ordinance, 2001, and rectified the original return/deemed order under S.120 of Income Tax Ordinance, 2001---Appellate Authority had confirmed the rejection of the revised return---Taxpayer had the right to revise his return and no provision of law restricted his right to file the revised return---Taxpayer had revised the return in accordance with law fulfilling the requirements of the provisions of S.114(6) of the Income Tax Ordinance, 2001, Adjudicating Authority had no power to declare the return to be invalid in such a manner---Adjudicating Authority after having declared the revision of return as valid, return had become a deeming order under S.122(3) of Income Tax Ordinance, 2001---Revised return would be treated as amended assessment order by the operation of law, and Adjudicating Authority was legally bound to consider the same as an amended assessment order---Adjudicating Authority had no authority to reject a revised return in the manner as mentioned in the rectification order---In presence of a valid revised return/order under S.122(3) of Income Tax Ordinance, 2001, Adjudicating Authority had no jurisdiction to rectify the original return under S.120 which had ceased to exist and rectification order under S.221 on the basis of earlier return, could not stay in the field.

2012 PTD (Trib.) 170 and 2013 PTD (Trib.) 1749 ref.

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

----S. 113---Minimum tax---Assessee, a distributor---Issue requiring consideration and adjudication was as to whether commission/margin of profit was amenable to the minimum tax or turnover in the case of a distributor---Marginal profit/commission as "turnover" in case of a "distributor" was amenable to minimum tax under S.113 of Income Tax Ordinance, 2001---Right of sale of goods by distributor was limited, restricted and controlled by the principal, which could not be treated as normal business/sales---For the services rendered by the distributor, principal/manufacturer would allow him remuneration in the form of discount at a fixed percentage of the value of goods distributed---Ordinary trader, having purchased the goods, had the right to sell to any person, at any rate and in any manner he could choose, but in the case of distribution, the price, the customer and the manner of sale were prescribed by the principal/manufacturer and the distributor had no choice in the matter---Ordinary trader in the case of rise and fall of the market, would make a profit or loss in respect of the stocks held by him, whereas in the distribution, the principal would increase the prices of its products the distributor was obliged to distribute the product on the price fixed by the principal when the principal would reduce the prices, the distributor had to sell the goods on the reduced price and the principal would compensate him, so that he could get the stipulated remuneration---Principal would not relinquish control over the goods till its disposal to the end consumer---No opening and closing stock had been declared by the taxpayer, even in his original return---Action of Adjudicating Authority in treating the sales mentioned in the original return as turnover for the purpose of S.113 of the Income Tax Ordinance, 2001, was unjustified and against the facts and circumstances of the case, for the reason that the taxpayer owned only margin profit/commission which could be treated turnover for the purpose of S.113 of the Income Tax Ordinance, 2001---While charging and confirming the issue of minimum tax, both the authorities below had not appreciated the true and correct facts of the case---Margin of profit/commission as declared by the taxpayer in the revised return was amenable to minimum tax under S.113 of Income Tax Ordinance, 2001, if exceeded the minimum threshold of charging turnover tax.

Messrs Allied Marketing (Pvt.) Ltd.'s case I.T.As. Nos. 1293-1296 and 1578/LB of 2011 dated 24-2-2012; I.T.As. Nos. 463, 464/LB of 2010 dated 1-12-2011; 2006 PTD (Trib.) 1699; I.T.A. No.238/LB of 2003 dated 16-8-2004; I.T.As. Nos.4469-4470/LB of 2002 dated 6-5-2004; 2003 PTD (Trib.) 869 and I.T.As. Nos.1-2/IB of 2014 dated 14-3-2014 ref.

Naeem Munawar for Appellant.

Ms. Misbah Nawaz, D.R. for Respondent.

Date of hearing: 15th May, 2014.

2015 P T D (Trib.) 2011

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member and Muhammad Majid Qureshi, Accountant Member

I.T.As. Nos. 850/IB to 854/IB of 2013, decided on 17th June, 2014.

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

---Second Sched, Part-1, Cl. (74)---"Term deposit"---Scope---"Term deposit" generally referred to a saving account or certificate of deposit which paid a fixed rate of profit on maturity of certain date---Funds allocated in such "term deposit" usually could not be withdrawn prior to maturity otherwise certain penalty was to be paid---"Term deposit" being time bound, differed significantly in nature from "checking accounts" therefore it was obvious that funds deposited in such accounts being bound for a particular length of time would not be utilized in running projection operations during currency of that financial year.

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

----Second Sched., Part-1, Cl. (74)---"Term deposit"---Exemptions---Interest income earned from "term deposit" by tax payer did not cover exemption as provided in Clause 74 , Part-I of Second Schedule of Income Tax Ordinance, 2001 until same was brought back to regular stream of business operation---"Term deposit" attracted a higher profit compared to normal deposits due to their long term removal from routine or ordinary course of tax-payer's business operation therefore assessing authority was justified not to extend benefit of exemption on such deposit---Clause (74), Part-I of Second Schedule of Income Tax Ordinance, 2001, provided exemption only to bank deposit relating to routine business operation of tax payer and not long term deposit---Exemption provisions were to be strictly construed---If the intention of legislature had been to extend exemption to entire profit on debts/interest income, words "bank deposits" would have not been expressed in Clause 74 , Part-I of Second Schedule of Income Tax Ordinance, 2001.

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

----S. 2(1)---Constitution of Pakistan, Art. 260---"Industrial establishment"---Charging of such fund from net profit---According to Art. 260 of the Constitution "electricity" fell within definition of goods and articles produced, therefore, establishment of tax payer company squarely fell within definition of "industrial establishment" as provided in S. 2(1) of Workers' Welfare Fund Ordinance, 1971---Tax-payer was liable to pay workers welfare fund on its total income, being an "industrial establishment" within meaning of Workers, Welfare Fund Ordinance, 1971---Charge of workers welfare fund was consequence of taxable income---If there was some taxable income, provisions of workers' welfare fund automatically come in operation.

Cape Brandy Syndicate v. IRC, Rowlatt J.; WT Ramsay Ltd v. CIR (1981) STC 174; CIT v. Muhammad Kassim 2000 PTD 280 (HC Kar.); Mehran Associates v. Commissioner of Income Tax 1993 PTD 69; 2010 PTD 704 = 2010 PTD 704; 2005 YLR 3319 and 1987 SCMR 1840 ref.

Syed Tariq Jameel, FCA and Waqar Zafar, FCA, for Appellant.

Said Minaf, D.R. for Respondent.

Date of hearing: 23rd May, 2015.

2015 P T D (Trib.) 2042

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Fiza Muzaffar, Accountant Member

Messrs AMMAR STEEL INDUSTRY, LAHORE

versus

C.I.R., ZONE-IV, R.T.O., LAHORE

I.T.A. No.2652/LB of 2014, decided on 16th January, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 114, 121(1)(d), 122(1), 131, 174(2) & 214---Making addition in income on account of alleged concealed purchases---Selection of case for audit---Amendment of assessment---Failure to issue notices to taxpayer---Taxpayer filed income tax return for relevant year declaring income---Case of taxpayer was selected for audit by Federal Board of Revenue---Case was fixed for hearing before Inland Revenue Officer, Audit Unit, but no compliance was made to the notices by the taxpayer and Inland Revenue Officer proceeded to pass order under S.121(1)(d) of Income Tax Ordinance, 2001---Taxpayer being aggrieved of the said order filed first appeal, and Appellate Authority affirmed the assessment order---Validity----Mandatory show-cause notice and other statutory notice, had not been served on the taxpayer, and ex parte order had been passed against taxpayer---Service of notice on the taxpayer, was condition precedent for assumption of jurisdiction---Service of notice would mean, a valid and proper service as required under the law, and not otherwise---Mandatory notice under S.122(9) of Income Tax Ordinance, 2001, having not been served on the taxpayer, impugned order was unlawful and illegal, which deserved quashment/cancellation---Impugned order, was not a speaking and best judgment order---Additions were made on adhoc, lump sum and without assigning any plausible reasoning---Addition made on account of suppressed sales made without mentioning any relevant section or clause was not permissible under the law---Addition made on account of purchase under S.111(1)(d) of Income Tax Ordinance, 2001, was not maintainable in the eyes of law---Unless, it could be established that the taxpayer had made an investment or was found to be owner of money or valuable article, no addition could be made under S.111(1)(b)---Authority had failed to establish that the taxpayer made any investment or found to be owner of valuable article---Section 111 of Income Tax Ordinance, 2001, being a charging provision, could not be applied retrospectively---Addition, merited deletion on that ground alone---Issuance of specific notice under S.111 of Income Tax Ordinance, 2001, was pre-requisite for making addition, but no such notice was ever issued---Taxpayer was maintaining books of account on mercantile system of accounting, where transactions were to be recorded on accrual basis, whereas Sales Tax Rules allowed the relaxation to a person to claim the input tax against purchases in the succeeding six months---No reason existed to upheld the additions made on account of suppressed sales and purchases which were deleted---Orders of the authorities below, were accordingly vacated.

1971 SCMR 681; 2013 PTD 881; 2008 PTD 1607; 2011 PTD 2265; 2002 PTD 102; 2010 PTD 704 and 2010 PTD (Trib.) 790 ref.

1988 PTD 117 (Trib.); 2003 PTD 2689 and 2006 PTD (Trib.) 1665 rel.

Muhammad Ijaz Ali Bhatti for Petitioner.

Farrukh Majeed, DR for Respondent.

Date of hearing: 16th January, 2015.

2015 P T D (Trib.) 2059

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar Accountant Member

C.I.R., ZONE-VIII, R.T.O., LAHORE

versus

Messrs HAIER PAKISTAN (PVT.) LTD.

I.T.As. Nos.1334/LB, 76/LB 1148/LB of 2014, decided on 10th December, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 21(c)(h), (N), 22(13)(a), 122(5-A) & 131, Second Sched., Part III, Clause (8)---Deduction---Depreciation---Amendment of assessment---Respondent/taxpayer company, was distributor of electrical home appliances, manufactured by a manufacturing company---Taxpayer by applying provisions of Cl.(8) of Part III of Second Schedule to Income Tax Ordinance, 2001, claimed rebate of 80% towards minimum tax, which was refused by the department---Appellate authority found that the taxpayer being distributor of consumer's goods, was entitled for 80% rebate towards minimum tax---Validity---Taxpayer as per agreement with manufacturing company, had to bear entire distributory costs, which included "Depreciation", "Advertisement", "Sale Promotion" "FOC brand promotion", "Product business expenses" etc.---No one could go beyond the express words given by the legislature---When legislature, had not linked the consumer's rebate with the gross profit or net profit, there was no justification to allow the rebate only to the consumers enjoying low margin of gross profit---Intention of legislature, was to grant rebate to distributors, as they had heavy turnover, but lesser income so as to pay 1% of turnover as minimum tax---80% distributory rebate was available to the taxpayer company, departmental appeal was rejected on that issue---Taxpayer had claimed depreciation on trucks with value of each truck at Rs.28,43,085, Adjudicating authority restricted the value of trucks at Rs.15,00,000 for allowance of depreciation, resulted into addition of Rs.60,4839 towards income---Appellate Authority, deleted the addition on the ground that as per S.22(13)(a) of Income Tax Ordinance, 2001, restriction of value of vehicles was for passenger transport vehicles, not plying for hire---No reason existed for interference with order of Appellate Authority on that issue---Taxpayer had claimed advertisement and sale promotion expenses at Rs.245,121,888, adjudicating authority concluded that claim of expense was not in accordance with increase in turnover, and made addition of Rs.98,73,4967 under S.21(N) of Income Tax Ordinance, 2001---Appellate Authority found the said addition as unlawful and deleted the same in toto---Amendment of assessment under S.122(5-A) of Income Tax Ordinance, 2001, could not be made on the basis of assumption and guesswork---Taxpayer claimed "FOC brand promotion expenses" at Rs.460,533,868 which had been amortized by Adjudicating Authority over a period of ten years, which resulted into addition of Rs.414,480481 towards declared income---Appellate Authority, deleted said addition---No reason existed to interfere with the treatment given by Appellate Authority---Claim of taxpayer was upheld and departmental appeal was rejected---Taxpayer submitted details, which included initial cost, accumulated depreciation, written down value and sale proceeds to establish that there was no gain on sale of vehicles---Adjudicating authority, calculated depreciation on the basis of unsold vehicles, which resulted addition towards gain on sale of vehicles and depreciation respectively---Such additions, had been upheld by Appellate Authority---Taxpayer claimed expenses under the Head 'Product Manager Business Expenses"---Adjudicating Authority disallowed said claim under S.21(h) of the Income Tax Ordinance, 2001, holding that no product was being manufactured by the company---Addition under S.21(h) of the Income Tax Ordinance, 2001, had been made on the basis of assumption, conjectures and without appreciating the facts of the case---No reason existed for the invocation of S.21(h) of the Income Tax Ordinance, 2001, in rejection of claim---Appellate Tribunal, having already deleted the addition made under S.21(h) of the Income Tax Ordinance, 2001 for tax year 2011, addition under S.21(h) of the Income Tax Ordinance, 2001, was also deleted.

2013 PTD (Trib.) 1413; 2013 PTD 697; 1990 PLD 332; 2011 PTD (Trib.) 1950; 2013 PTD (Trib.) 1083; 1999 PTD 2851; 2009 PTD 121; 2010 PTD 111 and 2013 PTD 900 rel.

Dr. Javed Iqbal Sheikh, D.R. for Appellant (in I.T.As. Nos.1334/LB and 76/LB of 2014).

Shahid Bashir, ITP for Respondent (in I.T.As. Nos.1334/LB & 76/LB of 2014).

Shahid Bashir, ITP for Appellant (in I.T.A. No.1148/LB of 2014).

Dr. Javed Iqbal Sheikh, D.R. for Respondent (in I.T.A. No.1148/LB of 2014).

Date of hearing: 10th December, 2014.

2015 P T D (Trib.) 2172

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs STYLO SHOES, LAHORE

versus

C.I.R. ZONE-X, R.T.O.-II, LAHORE

S.T.A. No.261/LB of 2014, decided on 11th December, 2014.

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

----Ss. 2(37), 11, 33, 34, 36, 38 & 46---Sales Tax Special Procedure Rules, 2007, Rr.3, 5 & 6---S.R.O. 1125(I)/2011, dated 31-12-2011, clause (viii)---S.R.O. 1(I)/2011, dated 01-1-2011---Assessment of sales tax---Modes---Appellant/registered person, was engaged in retail sales of footwear, hand bags and other accessories, was registered as "retailer"---Contravention report against appellant alleged that appellant was paying turnover tax under Sales Tax Special Procedure Rules, 2007, whereas he was required to pay sales tax in accordance with provisions of clause (viii) of S.R.O. 1125(I)/2011, dated 31-12-2011, and that in that way appellant had evaded sales tax---Validity---S.R.O. 1125(I)/2011, dated 31-12-2011, specifically dealt with the persons, who were registered as "manufacturer", 'importer', 'exporter' and 'wholesalers'; whereas the 'retailers' had been separately dealt differently from that categories of 'manufacturers, importers, exporters and wholesalers'---Clarification issued vide S.R.O. 1(I)/2011, dated 1-1-2011, cleared the intention of Legislature that the persons engaged in retail only, were subject to levy of sales tax under "Sales Tax Special Procedure Rules, 2007", issued from time to time; whereas the manufacturers-cum-retailers, including the importers, exporters and wholesalers, were required to levy and pay the sales tax under S.R.O. 1125(I)/2011, dated 31-12-2011, and other notifications issued earlier from time to time---Rule 5(2) of Sales Tax Special Procedure Rules, 2007, had covered the entire "Turnover of a Retailer" including the turnover related to exempt, zero rated and Third Schedule items---Said rule, did not provide any distinction by stating that any part of turnover of retailer including turnover of specified goods, would not be subjected to tax under that chapter---Appellant being registered as retailer, was liable to pay tax under the Sales Tax Special Procedure Rules, 2007; and the tax charged by Assessing Officer vide order-in-original under S.R.O. 1125(I)/2011 was not in accordance with law---Show-cause notice and assessment order issued by Assessing Officer in the case of appellant under S.11(2) of Sales Tax Act, 1990, by holding that appellant had committed tax fraud under S.2(3) of Sales Tax Act, 1990, were illegal, void and unlawful---Proceedings initiated in case of appellant without issuing the prior notice under S.38(1) of Sales Tax Act, 1990, would not sustain in the eyes of law and the entire superstructure built on illegal proceedings, was declared null and void, especially when Assessing Officer had issued impugned order without making personal hearing of the appellant---Impugned orders of authorities below, were vacated, in circumstances.

2004 PTD 2479; 1999 PTD 4138; 2000 PTD 280; 2013 PTD 713; 1990 PTD 389; Caltex v. Collector 2006 SCMR 1519; AC Customs v Khyber Electric Lamps 2001 SCMR 838; 2013 PTD (Tirb.) 228; Rupali Polyester Ltd. v. Collector CE and ST 2009 PTD 538; 2005 PTD 165; PLD 1964 SC 410; 1999 PTD 1358;

2011 PTD 726; 2010 SCMR 1778; 2010 SCMR 1475; 2010 SCMR

511; 2009 SCMR 1407; 2013 PTD 2130; 2006 PTD 1396; 1981

PTD 210; 2002 PTD 2379; 2002 PTD 407; 2010 PTD (Trib.)

1515; 2005 PTD (Trib.) 1154; PLD 1963 Kar. 280; 1995 CLC

1453; PLD 1991 Kar. 320 and 2004 SCMR 456 = 2004 PTD 1179

ref.

(b) Interpretation of document---

----Document was to be read as a whole, and not in piece, or in conjunction with any other material which was not part of document.

2002 PTD 388 and 2002 PTD 804 ref.

Muhammad Awais, Habib-ur-Rehman Zubairi, Aqeel Ahmad and Aamir Younas for Appellant.

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

Date of hearing: 8th December, 2014.

2015 P T D (Trib.) 2241

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

Messrs T.U. PLASTIC INDUSTRIES LTD., LAHORE

Versus

C.I.R., ZONE-VII, R.T.O., LAHORE

I.T.As. Nos. 2221/LB and 2062/LB of 2014, decided on 10th December, 2014.

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

----Ss. 111, 114, 120, 122 & 177---Amendment of assessment---Making

addition in the income on ground of sales and suppression in sales and

production---Return of income for relevant year, declaring income was deemed to be treated as assessment in terms of S.120 of Income Tax Ordinance, 2001---Case of the taxpayer was selected for audit in terms of S.177 of the Ordinance---Assessing Authority came to the conclusion that deemed assessment needed, modification in terms of S.122(4)(5) of the Income Tax Ordinance, 2001, and Assessing Authority proceeded ex parte against the taxpayer and amended assessment by making additions towards income of the taxpayer under various sections of Income Tax Ordinance, including S.111(1)(d) of the Ordinance---On filing appeal by the taxpayer, Appellate Authority vide impugned order allowed partial relief to the taxpayer---Both, the taxpayer and the department were not satisfied with the impugned order of Appellate Authority and had filed appeal before the Tribunal---Assessing Authority, during course of amendment of assessment proceedings, had shown purchases amounting to Rs.1,174,454,469, whereas in the income tax return, same were declared at Rs.1,163,988,824---There was a difference of Rs.10,465,627, which was added under S.111(1)(d) of Income Tax Ordinance, 2001---Difference of stock was also added as understated sales of Rs.15,755,174, which was added under S.111(1)(d) of the Ordinance---Appellate Authority upheld the addition of Rs.15,755,174, which was contested by the taxpayer as illegal whereas the addition of Rs.10,465,627, was remanded to the assessing authority, which was assailed by both the parties as contrary to law---No justification existed for the Appellate Authority to remand the addition on account of difference of Sales in sales tax/income returns to the assessing authority to revisit the issue in the light of the information/data available--- Taxpayer had satisfactorily reconciled the matter and explained to the Appellate Authority that there was no difference of declaration made in the income tax/sales tax---Said reconciliation was duly incorporated in the body of the impugned order, which clearly depicted the actual position---Addition made under S.111(1)(d) of Income Tax Ordinance, 2001, amounting to Rs.10,465,627, in circumstances, was not maintainable in the eyes of law, which was deleted---Order of Appellate Authority, in that regard was vacated---Appeal of the taxpayer was accepted and that of the department was rejected in circumstances---Addition made under S.111(1)(d) of Income Tax Ordinance, 2001, was made purely on presumption and surmises as the department had failed to bring on record any concrete evidence or definite information that there was difference in stocks of raw material---Certain elements of wastage work were in progress, decay or theft which could not be ruled out, and addition could not be made on supposition---No reason being available to maintain the addition amounting to Rs.15, 755,174, same was deleted---Order of Appellate Authority in that behalf, was vacated.

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

----Ss. 67, 111, 114, 120 & 122---Amendment of assessment---Making additions in the income on ground of allocation of incomes---Assessing Authority after perusal of the audited accounts and the return of income had observed that taxpayer had earned income from local sales/supplies and export sales, but the income between the NTR and PTR having not apportioned properly, Assessing Authority proportionated the same, and made the addition under S.67 of Income Tax Ordinance, 2001, at Rs.51,169,311---Appellate Authority remanded the issue to the assessing authority to allocate specific expenses attributed to sales and exports---Both the parties assailed the action of assessing authority as contrary to law and facts of the case---Held, taxpayer had reconciled the matter to substantiate his claim that allocation of expenses was on the basis of percentage of sales between NTR and PTR---Appellate Authority despite being convinced with the submission of the taxpayer, remanded the case to the assessing Authority, which was not justified--- Taxpayer having satisfactorily explained the position, there was no reason to maintain the addition made under S.67 of Income Tax Ordinance, 2001, which was deleted---Order of Appellate Authority was vacated and departmental appeal on that issue was rejected, whereas taxpayer's appeal was accepted.

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

----Ss. 111(1)(b), 114, 120 & 122---Amendment of assessment---Making additions in income on account of unexplained imports---Assessing authority found that there was difference of imports declared by the taxpayer vis-a-vis customs data available on the system and made the addition of Rs.68,938,492, under S.111(1)(b) of the Income Tax Ordinance, 2001---Appellate Authority, on appeal, reduced the addition to Rs.54,827,232---No exception could be taken to the treatment as accorded by Appellate Authority, which was found to be fair and reasonable in the ambient circumstances of the case---Appellate Authority had rightly reduced the addition to Rs.54,827,232, which was in accordance with the declaration made---Orders of the Appellate Authority in that behalf was maintained accordingly.

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

----Ss. 111(1)(b), 114, 120 & 122---Amendment of assessment---Addition made in the income on ground of unexplained local purchase---Assessing authority found that there was difference between local purchases declared in the sales tax/income tax returns---Assessing authority made addition of differential amount of Rs. 137,765,244, under S.111(1)(b) of Income Tax Ordinance, 2001, as unexplained investment---Appellate Authority reduced the addition to Rs.117,591,614---Both parties being not satisfied, had assailed the finding of the Appellate Authority as contrary to law and facts of the case---Held, assessing authority had failed to take into consideration the declaration made in the relevant columns of the return of income; and Appellate Authority had duly noticed the same, while according relief to the taxpayer, but Appellate Authority had failed to take into consideration the payments made to WAPDA by way of payment of electricity bills---After considering all aspects of the case, there was no difference of purchases as declared in the returns of income vis-a-vis sales tax returns---Impugned addition in the income being made purely on presumption/supposition, was not maintainable in the eyes of law, which was deleted---Order of Appellate Authority in that behalf was accordingly vacated---Departmental appeal was rejected, while taxpayer's appeal on the issue vas accepted.

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

----Ss. 111, 114, 120, 122, 153 & 174(2)---Amendment of assessment--- Addition in the income of taxpayer on ground of unverifiable purchases---Addition in the income of the taxpayer was made under S.174(2) of the Income Tax Ordinance, 2001, on account of local purchases as the taxpayer had not provided purchase ledgers etc. to the assessing authority---Appellate Authority remanded the issue to the assessing authority for consideration---Said addition was made on supposition and there was no "definite information" available with the department to make such addition--- Taxpayer had provided the party-wise ledgers and invoices along with details of purchases; and tax deducted thereon under S.153 of the Income Tax Ordinance, 2001---Declaration so made in the return of income duly commensurate with the declaration made in the sales tax return---No justification existed for making the addition under S.174(2) of Income Tax Ordinance, 2001, which was deleted being not maintainable in the eye of law.

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

----Ss. 39(3), 114, 120 & 122---Amendment of assessment---Making addition on loan from Director---As per balance sheet for the year under consideration, loan amounting to Rs.100,000,000, was shown by the taxpayer to have been received from the Director, which was disallowed by the Assessing Authority on the plea that no entry in the bank statement was available---Appellate Authority upheld the addition have been made in accordance with law---Representative of the taxpayer had explained that the loan was advanced by the Director to import machinery from abroad, which was imported and installed at the business premises of the taxpayer---Taxpayer produced agreement between the Chief Executive and the company to lend amount in question which was paid outside Pakistan for the purchase of plant and machinery---No justification was for the Assessing Authority to make the addition---Loan advanced was duly incorporated in the books of accounts of the company---No corroborative explanation was available with the department to discard the loan agreement available with the parties---No reason was available to maintain the addition made under S.39(3) of Income Tax Ordinance, 2001, which was deleted being not maintainable in the eye of law---Order of Appellate Authority in that regard was vacated.

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

----Ss. 21, 111, 120 & 122---Amendment of assessment---Making addition on ground of lease finance charges---Assessing Authority on perusal of audited accounts, had noticed that the taxpayer had claimed expenses of Rs.6,729,332 under the head "Lease finance charges", which was disallowed being inadmissible in terms of S.21 of the Income Tax Ordinance, 2001---Appellate Authority remanded the issue to Assessing Authority for de novo decision---Computation chart, revealed that the, taxpayer had itself added back the lease finance expenses while arriving at the net profit for the relevant year---Impugned addition was a double jeopardy when the taxpayer company had already added back the expenses---Addition made under S.21 of the Income Tax Ordinance, 2001 was deleted.

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

----Ss. 24(5), 34(5), 111, 120 & 122---Amendment of assessment---Making addition in the income on the ground that taxpayer had failed to provide aging composition of creditors---Assessing Authority, made addition under S.34(5) of the Income Tax Ordinance, 2001 at Rs.21,328,199, on the ground that the taxpayer had failed to provide aging composition of creditors for the last four years---Appellate Authority deleted the addition having not been made in accordance with the provisions of S.34(5) of the Income Tax Ordinance, 2001---Assessing Authority, just picked the difference of tax creditors declared in the tax years 2009 and 2012 and made the addition without taking into consideration the provisions of S.24(5) of the Income Tax Ordinance, 2001, which provided that a liability was chargeable to tax in the first year following the end of three years, which in the present case became tax year 2013 and not tax year 2012, as wrongly noticed by the Assessing Authority---Appellate Authority had rightly deleted the addition, which action was maintained, and the departmental appeal in the issue, was rejected.

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

----Ss. 21, 111, 120 & 122---Amendment of assessment---Making addition on account of cash expenses---Assessing Authority, found that the taxpayer had made cash payment to the tune of Rs.168,095,667; and expenses so incurred, might have been paid in violation of S.21 of Income Tax Ordinance, 2001---Assessing Officer made the addition under S.21(1) of Income Tax Ordinance, 2001 amounting to Rs.36,461,279---Appellate Authority remanded the matter to the Assessing Authority to revisit the issues---Impugned addition having purely been made on presumption and supposition, no justification existed to remand the matter to the Assessing Authority---Addition in question was deleted and order of Appellate Authority was vacated.

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

----Ss. 28(i), 111, 120 & 122---Amendment of assessment---Making addition on account of payment of financial charges---Taxpayer company, availed short term loan facility of Rs.232,495,365 against which it claimed financial charges of Rs.33,959,035, but Assessing Authority curtailed the financial charges on the ground that taxpayer advanced loan to associated concerns, so the company had borne lesser financial charges-Addition of Rs.2,037,543 was made towards income for the year---Appellate Authority upheld the addition as made by Assessing Authority-Assessing Authority, had illegally apportioned financial charges between receivables from associated concern and the company---Apportionment had been made on the basis of assumption and surmises, whereas same had to be based on evidence---Assessing Authority had to prove that borrowed funds were utilized for non-business advance---No reason existed to maintain the impugned addition, which was deleted---Order of Appellate Authority in that behalf was vacated.

2006 PTD 1343 ref.

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

----Ss. 21(c), 111, 120, 122 & 165---Amendment of assessment-- Making payments under heads "rent, legal and professional charges" etc.---Failure to deduct tax---During the course of re-assessment proceedings, it was found by the Assessing Authority, that the taxpayer company had made payments under the head rent, rates and taxes, legal 'and professional charges, freight and forwarding and auditors remuneration, but no tax was shown to have been deducted while making such payments---Assessing Authority made addition of Rs.5,983,243---Appellate Authority being satisfied with the submissions of taxpayer, proceeded to remand the issue to the Assessing Authority, with observation that though CPR Nos. of tax deducting and paid, were provided but CPR were not provided---No exception could be taken to the action of Appellate Authority which was found to be reasonable in the circumstances of the case---No serious prejudice was available caused to both the parties with the direction of the Appellate Authority-- No reason was available to disturb his finding on the issue which was maintained.

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

----Ss. 111, 120, 122 & 174(2)---Amendment of assessment---Making addition on account of 'Miscellaneous Expenses'---During the course of audit proceedings, it was found by Assessing Authority that the taxpayer company had made payments under the heads "repair and maintenance (Machinery), repair and maintenance (vehicle), printing and stationery, traveling and conveyance, miscellaneous and packing material," but the company had not provided requisite record to prove that the payments were made in accordance with law---Assessing Authority accordingly disallowed the expenses to the extent of 30% of the total claim; and added back the same at Rs.7,503,618-Appellate Authority upheld the action of Assessing Authority-Whole addition was made out by the Assessing Authority on conjectures and surmises, and no instances were pointed out as to where the payment was not made in accordance with law, or due tax was not paid in the Government Exchequer---Assessing Authority had acted in a lumpsum manner by disallowing the expenses under the head to the extent of 30% of the total claim---No scope existed for making such addition in the new scheme of Income Tax Ordinance, 2001---Assessing Authority seemed to be in the old frame mind, and could not bring on record anything to justify its action that the payments were not made in accordance with law---No justification was available to uphold the addition under the head 'Miscellaneous Expenses', which was deleted---Order of Appellate Authority in that regard was accordingly vacated.

Tahir Mehmood and Miss Sumaira Khurshid for Appellants (in I.T.A. No.2221/LB of 2014).

Dr. Javed Iqbal Sheikh, D.R. for Respondent (in I.T.A. No.2221/LB of 2014).

Dr. Javed Iqbal Sheikh, D.R. for Appellant (in I.T.A. No.2062/LB of 2014).

Tahir Mehmood and Miss Sumaira Khurshid for Respondent (in I.T.A. No.2062/LB of 2014).

Date of hearing: 10th December, 2014.

2015 P T D (Trib.) 2271

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Had, Judicial Member

MUHAMMAD ASIF DILSHAD

Versus

C.I.R., R.T.O., MULTAN

I. T .A No.2570/LB of 2012, decided on 20th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 114, 120, 122 & 131---Filing of return of income--­Assessment---Amendment of assessment--- Unexplained income--- Taxpayer filed return of income for relevant year, declaring his business income, which was deemed to be treated as assessment in terms of S.120(1) of Income Tax Ordinance, 2001---Subsequently, the department received information with regard to purchase of immovable property by the taxpayer---Department, on said information, issued statutory notice to the taxpayer to explain the source of said investment---Taxpayer fully explained the source of said investment and Assessing Authority accepted said explanation---Assessing Authority, issued another notice to the taxpayer, with regard to his declared income for obtaining bank loan from Bank---Assessing Authority treating said declared income as unexplained income in terms of S.111(1)(b) of Income Tax Ordinance, 2001, proceeded to pass amended order---Appellate Authority upheld order of Assessing Authority--- Validity---Assessing Authority, had indulged in fishing and roving enquiries, because no such issue was raised in the original show-cause notice issued under S.122(9) of Income Tax Ordinance, 2001---Assessing Authority after receipt of reply to the original show-cause notice, had issued a second notice raising altogether a new issue, which action was not maintainable in the eyes of law---Department was not within its right to make fishing inquiries---Provisions of S.122(5) of Income Tax Ordinance, 2001, could be invoked only when an order passed by the Officer, was found amenable on the basis of a "definite information" and said information should be manifest in the show-cause notice, and not subsequently by a fishing inquiry---Declaration made before the Bank Authorities, could not be termed as "definite information", as such declaration filed with Banks, was merely for the purpose of obtaining financial assistance/loans and that could not be termed as "definite information" for the purpose of invoking S.122(5)---Declaration, or admission made before a third party, could at best be considered as an information on the basis of which the Assessing Authority was empowered to start investigation; and to find out as to whether that information was correct or not---No such effort was made by the Assessing Authority to prove that the declaration made before the Bank was correct, and the taxpayer had earned more income than that declared in the return of income---Assessing Authority was not justified to invoke the provisions of S.122 of Income Tax Ordinance, 2001---Subsequent addition under S.111(1)(b), was not maintainable; order of Appellate Authority, was vacated, in circumstances.

1993 PTD 1108; 1992 PTD 739 and 2006 PTD (Trio.) 2012 ref.

Appellant in person.

Mrs. Misbah Nawaz, D.R. for Respondent.

Date of hearing: 20th June, 2014.

2015 P T D (Trib.) 2283

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Raza Baqir, Accountant Member

Rana MUHAMMAD FAROOQ

Versus

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

MA (Stay) No.833, MA(Cond) No.41/LB of 2014 and I.T.A. No.956/LB of 2013, decided on 12th May, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 114, 120, 122(1)(5), 131 & 132---Filing of return of income---Assessment---Amendment of assessment---Delay in filing appeal---Condonation of---Grounds urged by taxpayer for condonation of delay being plausible, appeal was admitted for adjudication---Taxpayer, in the present case, had filed return of income for relevant tax year declaring income at Rs.125,000, which was deemed to be an assessment, and same stood finalized in terms of S.120 of the Income Tax Ordinance, 2001---Proceedings in the case were initiated on the information received by the department that taxpayer had purchased vehicle for a consideration of Rs.12,69,000---Said assessment was amended by making addition under S.111(1)(b) of Income Tax Ordinance, 2001---Appeal filed by taxpayer against order of Adjudicating Author it, was dismissed by the Appellate Authority--­Validity---Wealth statement/reconciliation statement filed by the taxpayer for relevant period, had revealed that taxpayer was correct in its assertion that he had net assets, and that for the purpose he had utilized these assets/funds available with him---Since, no unexplained amount was credited during the year under consideration in the wealth statement of the taxpayer, in view of provisions of S.111 of the Income Tax Ordinance, 2001, no addition could be made during the year under consideration---If the department had any objection with regard to the net assets, same could be probed by initiating proceedings for the relevant tax year; and if any addition required to be made, that could only be made in that relevant tax year---Taxpayer with the help of documentary evidence, had satisfactorily explained that he had made investment out of explainable sources---Addition made under S.111(1)(b) of Income Tax Ordinance, 2001 was not maintainable in the eye of law, and was deleted---Orders of the authorities below, were vacated and appeal of the taxpayer was accepted---Main appeal of taxpayer having been disposed of stay applications filed by the taxpayer, had become in fructuous and was dismissed, in circumstances. [pp. 2285, 2287] A, B & C

2007 PTD 1; 2002 PTD 608 and 2002 PTD 506 ref.

M. Nazir Chauhan for Appellant.

Ms. Misbah Nawaz, D.R. for Respondent.

Date of hearing: 12th May, 2014.

2015 P T D (Trib.) 2324

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Fiza Muzaffar, Accountant Member

SMEC INTERNATIONAL (PVT.) LTD., LAHORE

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, RTO, LAHORE

I.T.As. Nos.461/LB and 462/LB of 2014, decided on 10th December, 2014.

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

----Ss. 114, 120, 122(5-A) & 131---Filing return of income--­Assessment---Amendment of assessment---Return of income for relevant year filed by the taxpayer, was accepted as deemed assessment in terms of S.120 of the Income Tax Ordinance, 2001---Subsequently, Additional Commissioner, finding that deemed assessment completed was erroneous, amended the same under S.122(5-A) of Income Tax Ordinance, 2001---Appellate Authority and then Tribunal, annulled said amendment of assessment---Additional Commissioner again invoked the provisions of S.122(5-A) of Income Tax Ordinance, 2001 on the ground that he could amend the deemed assessment as many times as he would feel necessary, even if same had been amended--- Additional Commissioner again issued notice to the taxpayer, confronting taxpayer with new set of allegations, and passed impugned order ex parte against the taxpayer--- Validity---Additional Commissioner had not acted in accordance with law, and proceeded on fishing enquiries as, firstly he issued notice to amend the assessment on the ground that the taxpayer had to be treated as AOP, but later on he dropped said allegation---Additional Commissioner again' confronted the taxpayer with new set of allegations, which was not permissible under the law---Matter of how much receipts earned and tax deducted had already been satisfactorily been looked into by the department during the course of issuance of refund of the taxpayer---Fact of business receipts and tax deducted thereupon, was also directly verified by the department from the concerned parties---Initiation of ex parte proceedings, was against norms of natural justice; and Appellate Authority had already given categorical finding in that behalf and annulled the order on that score---Initiation of proceedings in the case under S.122(5-A) of Income Tax Ordinance, 2001, was not maintainable in the eye of law, and was liable to be treated as void ab initio, illegal and merited cancellation, and ordered accordingly--- Order of the Assessing Authority being not maintainable on factual, as well as legal grounds, was cancelled, in circumstances.

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

----Ss. 114, 120, 122(5-A), 131, 177 & 214---Filing return of income-- Income declared treated as assessment---Selection of case for audit---Taxpayer filed return of income for relevant year declaring income, which was deemed to be treated as assessment in terms of S.120 of the Income Tax Ordinance, 2001---Subsequently, case of the taxpayer was selected for audit under S.177 of Income Tax Ordinance, 2001---During the course of audit proceedings, books of accounts along with relevant details/documents were requisitioned, which were submitted by the taxpayer---Assessing Authority on scrutiny of all those documents, observed certain discrepancies, which were confronted through statutory notices to the taxpayer---.Taxpayer duly responded to these notices, but submission made by the taxpayer was found unsatisfactory; and Assessing Authority amended the assessment and made certain additions---On filing appeal by the taxpayer, Appellate Authority deleted said additions, whereas taxpayer's legal ground regarding very initiation of proceedings under S.177 of Income Tax Ordinance, 2001 was rejected---Issue of Selection of cases for audit under S.177(1) of Income Tax Ordinance, 2001 for the tax year 2010, had already been settled by the Lahore High Court---Amendment brought through Finance Act, 2010 in S.214 of the Ordinance, with regard to selection of cases for audit, and the power of the Commissioner had been restricted and reduced to mere conducting of the audit of the taxpayer, after the cases had been selected by Federal Board of Revenue---Appellate Tribunal cancelled the initiation of proceedings in the present case for audit under S.177 of Income Tax Ordinance, 2001, and subsequent amendment of assessment for the year 2010---Impugned order passed under S.122(5-A) of Income Tax Ordinance, 2001 by Assessing Authority was cancelled; and that of Appellate Authority, was vacated.

Messrs Chenone Stores Ltd. v. The Federal Board of Revenue and others Writ Petition No.393 of 2012 rel.

Muhammad Yameen FCA, Tahir Mehmod and Miss Sumaira Khurshid for Appellant.

Dr. Javed Iqbal Sheikh, D.R. for Respondent.

2015 P T D (Trib.) 2346

Inland-Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member

C.I.R., ZONE-VI, R.T.O., LAHORE

Versus

OMER SHAKEEL

I.T.A. No.1754/LB of 2012, decided on 18th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b), 114, 116, 120, 122-C & 131---Ex parte provisional assessment---Unexplained income---Assessing Officer proceeded- ex parte against the taxpayer and passed provisional assessment, whereby addition amounting to Rs.32,75,000 was made on account of investment made by the taxpayer on purchase of three motor vehicles from alleged unexplained income---Contention of taxpayer was that taxpayer was an existing assessee and filed his return of income for relevant year, which was deemed to be treated as assessment in terms of S.120 of Income Tax Ordinance, 2001 and that subsequent provisional assessment, was not maintainable in the eye of law---Appellate Authority being convinced with the submissions made by the taxpayer, annulled provisional- assessment--- Validity---Taxpayer had obtained NTN Certificate and filed the return of income for relevant period, which was deemed to be treated as assessment in terms of S.120 of Income Tax Ordinance, 2001---In presence of deemed assessment, provisional assessment framed for the same year, would tantamount to a "double assessment", which was not permissible under the law---Only recourse available to the Assessing Officer, under such circumstances was to resort to the provisions of S.122 of Income Tax Ordinance, 2001---Appellate Tribunal declined to disturb the order of Appellate Authority, which was maintained.

Mrs. Misbah Nawaz, D.R. for Appellant.

Mian Mansoor Ahmad for Respondent.

Date of hearing: 18th June, 2014.

2015 P T D (Trib.) 2352

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Faheemul Haq Khan, Accountant Member

Messrs WATEEN TELECOM (PVT.) LTD., ISLAMABAD

Versus

C.I.R., LARGE TAXPAYER UNIT, ISLAMABAD

F.E.As. Nos. 3/IB and 4/IB of 2013, decided on 23rd September, 2013.

Sales Tax Act (VII of 1990)--

----Ss. 3, 6(2), 7, 11, 33, 34 & 46---Federal Excise Act (VII of 2005), Ss. 3, 4, 8, 14, 16 & 19---S. R. O. 548(1)/2012, dated 27-5-2012 as modified by S.R.O. 700(I)/2012---Failure of taxpayer to file Sales tax return---Levy of penalty and default surcharge---Appellant had failed to file sales tax return for relevant period, violating provisions of Sales Tax Act, 1990, and Federal Excise Act, 2005---Adjudicating Authority, after issuance of show-cause notice to the appellant, imposed penalty along with default surcharge---Order of Adjudicating Authority was upheld by Appellate Authority below---Validity---S.R.O. 548(1)/2012, dated 22-5-2012, provided that Government had exempted whole of default surcharge and penalty for non-payment by a person against whom an amount of sales tax and Federal Tax Duty was alleged on account of audit observation--- Where refund became due to any person in consequence of decision or judgment of the court after the issuance of that notification, the tax deposited by that person under that notification would be refunded to him---Said S.R.O. did not exclude single default, or multiple defaults in its meaning and manifestation-- S.R.O. only took into account the amount of tax on account of audit observation, audit report show-cause notice or in adjudication order---On particular date, the scheme would take into account aggregate defaults to grant bilateral benefits i.e. payment of taxpayer voluntarily, and waiver of additional sums from the exchequer---Multiple default on the due date of compliance of S.R.O., would not impede the taxpayer from availing the benefit of the scheme---Said S.R.O., covered not only show-cause notice, but the adjudicating order as well, which would mean that despite the fact that proceedings were initiated quite early, yet the taxpayer would be entitled to the benefit of the scheme---In the present case, issuance of final SRO, and payment of Sales Tax/Federal. Excise Duty fell on the same date---Department had charged the additional levies on the plea that payment was made prior to the declaration/issuance of S.R.O.---Draft S.R.O., was released by FBR at least 15 days prior to the issuance of main S.R.O.; it was very much in the knowledge of taxpayer at least 15 days earlier that amnesty scheme, was in the process of launch, and no sooner the scheme attained finality the taxpayer made voluntary payment---In absence of conclusive evidence to the contrary, the taxpayer complied with S.R.O. in question---Charge of penalty and default surcharge in respect of principal amount, which was defrayed according to amnesty scheme, would not attract the penal provisions creating additional encumbrance on the taxpayer---S.R.O. 548, dated 22-5-2012, operational life of which was extended from 31-5-2012 to 25-6-2012 through amending S.R.O. No.700 dated 7-6-2012, would not give any concession to default, if occurred after said date.

2013 PTD (Trib.) 1322; 2006 PTD 336 and 2007 PTD (Trib.) 1775 rel.

Taqiuddin, FCA for Appellant.

Imran Shah, D.R. for Respondent.

Date of hearing: 3rd September, 2013.

2015 P T D (Trib.) 2375

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Ms. Farzana Jabeen, Accountant Member

Messrs ENGRO CORPORATION LTD., KARACHI

Versus

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

I.T.A. No.1002/KB of 2013, decided on 16th December, 2013.

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

----Ss. 18(2) & 39---Income from business---Income from other sources---Effect---Section 18(2) of Income Tax Ordinance, 2001 deals with business income derived by a "person"---If main source of income fell under S. 18(2) of Income Tax Ordinance 2001, S. 39 of Income Tax Ordinance, 2001 dealing with other source of income attained character of residuary.

1999 PTD 780 (Trib.) ref.

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

----Ss. 2(46), 80 & 151(3)---"Person"---Connotation---Profit on debt--- Scope---Department had made restrictive approach by observing that since money was not stock-in-trade, importer was not involved in money lending business like a financial institution---Department had restricted profit on debt only for financial institutions---Department had failed to take cognizance of S. 151(3) of Income Tax Ordinance, 2001 which in unequivocal terms laid down that it would operate as final tax regime to financial institutions which fell other than the "company" meaning thereby that profit on debt would not fall under final tax regime in case of importer being deriving income from normal business of profit on debt---According to Ss. 2(46) & 80 of Income Tax Ordinance, 2001 taxpayer, a company, incorporated under Companies Ordinance, 1984 fell under category of "person", hence, approach of department excluding taxpayer company was not conceivable.

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

----Ss. 18(2), 2(46), 11 & 39---Income from business and other sources---Profit on debt---

"Person"---Scope---Under S. 18(2) of Income Tax Ordinance, 2001, profit on debt was chargeable to tax under head of 'Income from business' where person's main business was to derive such income---Heads of income were not the same as sources of income---For same head of income, there could be more than one sources of income---Source did not mean head of income but specific source from which a particular income arose---Source of income was relevant for determining first whether it was assessable or not and if it was not exempt or immune from tax then next step was to decide under which head of income it had to be assessed--- Various heads under S. 11 of Income Tax Ordinance, 2001 were mutually exclusive---Section 39 of Income Tax Ordinance, .2001 contained provisions about residuary head viz. Income from other sources and it did not come into operation until preceding heads (a) (b) (c) (d) mentioned in S. 11 of Income Tax Ordinance, 2001 were excluded.

The Genetech's case 2004 PTD 2255; Liquidator Khulna Bagerhat Railway Company's case 1962 PTD 415 and Khairul Hayat Amin and Company's case 2000 PTD 363 ref.

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

----Ss. 18, 11 & 39---Income from business and other sources--- Applicability---Where an income could appropriately fall under S. 18 of Income Tax Ordinance, 2001 as business income or any other specific head of income then no resort could be made to S. 39 of Income Tax Ordinance, 2001---Words "if it is not chargeable to income tax" under any heads specified in S. 11, items (a) to (e) refer to income and not to a head of income---Section 39 of Income Tax Ordinance, 2001 dealt with income which was not included under any of preceding head and it was a residuary head of income---If an income was chargeable to tax and was not covered under other heads of income then its head of income would be "income from other source"---Source of income could not be brought under residuary head if it come under any of the specific heads.

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

----S.10---"Total income"---Income liable to be included in total income was chargeable to tax as income under residuary head if it was not chargeable under specific head under which it normally fell.

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

----S.11---Heads of income---Neither revenue nor taxpayer could claim that an income which clearly fell under one head should be dealt with under a different head---For determining under which head an income would fall, its commercial character was a relevant factor---Time or method and particularly source of income and nature of business of taxpayer was the relevant consideration.

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

----S. 15---Heads of income---Sole criterion to classify income under S.15 of Income Tax Ordinance 1979 was source or nature of activity and conduct wherefrom or whereby particular income was being generated---As long as sources could be factually found, circumstances seldom had any bearing on characteristic of income.

CIT Karachi v. Gelcaps (Pvt.) Ltd. Karachi 2009 PTD 331 rel.

1999 PTD 708 distinguished.

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

----Preamble---Proceedings under Income Tax Ordinance, 2001-- Nature-Applicability of principle of res judicata to income tax proceedings---Scope---Principle of res judicata did not apply in income tax proceedings as in civil proceedings---Each tax year revolved around its own facts and circumstances of case and had separate and independent unit of assessment, facts, circumstances, status mode, method, character, transaction, nature and activity of source and decisions be given considering taxpayer's history for year under consideration-Assessment proceedings under Income Tax Ordinance, 2001 during an assessment year could not operate as res judicata and thus every assessment had to be finalized on its own merits independent of previous year's assessment---Previous decisions or findings could be reopened if fresh facts came to light which on investigation would lead to a conclusion different from that of its predecessor.

CIT Central Zone B, Karachi v. Farrokh Chemical Industries 1992 PTD 523; CIT v. Waheeduzzaman PLD 1965 SC 171; Seth. Ram ,Nath Daga v. CIT (1971) 82 ITR 287; Kaniram Ganpat Raj v. CIT (1941) 9 ITR (332); Tejmal Bhojraj (1941) 22 ITR 208 (Nag.) and IR v. Sneath 17 TC 149, 163 (CA) rel.

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

----S. 207----Decision of Income tax authorities---Scope---Previous decision of Income Tax Authority will not be a bar where the earlier decision is clearly open to some objection; if it is a decision which is not reached after proper enquiry; if fresh evidence having a material bearing on the point decided in the previous decision is available and if it is a decision as could not reasonably have been reached on the material before the authority.

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

----S.207---Income Tax authorities---If taxpayer in a subsequent year was able to satisfy income tax Authority that previous finding was not correct either because it was not arrived at after due enquiry or because it was arbitrary or if taxpayer had put before income tax authorities fresh facts/fresh light to facts from which a different conclusion could be arrived at, in that case Income Tax Authority would be justified in arriving at a different conclusion that what was arrived at in previous proceedings.

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

----S.207---Income Tax Authorities---Facts of impugned order of authorities below had no binding effect against or in favour of taxpayer in a subsequent year, though they were relevant---Such orders in some cases might even constitute cogent evidence.

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

----S.207---Income Tax Authorities---If department had wrongly arrived at a certain finding in a past year and taxpayer had accepted same or if department failed to protest against a wrong departure that would give taxpayer no claim to have mistake repeated in a subsequent year in his favour.

Absalom v. Talbot [26 TC 166, 192 (HL)]; CIT v. Basantrai Takhat Singh( 1 ITR 197; Salisbury House Estate Ltd. v. Fry 15 TC 266; 273 ITR 1; AIR 2005 SC 796 and 283 ITR 432 rel.

Syed Shabbir Hussain Zaidi, CA for Appellant.

Yousuf Hyder Sheikh, D.R. and Muhammad Amin Qureshi, DCIR for Respondent.

Date of hearing: 16th December, 2013.

2015 P T D (Trib.) 2427

[Inland Revenue Appellate Tribunal]

Before Muhammad Pervez Alam, Accountant Member

Messrs LUCKY HOLDING LTD., PESHAWAR

Versus

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

I.T.A. No. 267(PB) of 2014, decided on 15th January, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 18, 113, 120, 122(5-A), 131, 150, 151, 169 & Second Schedule, Part-I, Clause 103-A---Charging minimum tax on declared dividend income and on profit on debt---Exemption, claim for---Taxpayer declared dividend income at Rs.140,262,000 and profit on debt at Rs.2,964,000---Taxpayer claimed exemption on said income under clause 103(A) of Part-I of Second Schedule to Income Tax Ordinance, 2001---Original Adjudicating Authority; included dividend income as well as profit on debt in the turnover of the taxpayer, and subjected the same to the minimum tax under S.113 of Income Tax Ordinance, 2001---Appeal of taxpayer before Appellate Authority was rejected---Taxpayer had pleaded that the dividend income and profit on debt being subject of final tax, had been excluded from the purview of S.113 of the Income Tax Ordinance, 2001---Validity---Tax deductible on profit on debt fell under S.151 of the Income Tax Ordinance, 2001, which was reflected in S.169 of the Income Tax Ordinance, 2001 as final tax---Tax deduction from dividend income, was under S.150 of the Income Tax Ordinance, 2001, and was not reflected in S.169 of the Income Tax Ordinance, 2001, same could not be excluded from the turnover of the taxpayer--- Taxpayer had pleaded that, taxpayer, being an Inter corporate entity and was registered with the Security Exchange Commission of Pakistan as holding company, was exempt

under clause 103-A to the Second Schedule of the Income Tax Ordinance, 2001--- Taxation Officer, was directed to verify the plea of the taxpayer, whether taxpayer-company was inter-corporated entity or otherwise and Taxpayer was directed to submit complete details to the Taxation Officer in that respect---If the plea of the taxpayer was found documented, dividend income could be excluded from the turnover, as the same was exempt under C1.103-A to the Second Schedule of the Income Tax Ordinance, 2001, if not so, the dividend income would be straightaway subject to tax under S.150 of the Income .Tax Ordinance, 2001---Same treatment, in case of failure on the part of taxpayer, could also be advanced to profit on debt, and be subjected to tax under S.151 of the Income Tax Ordinance, 2001.

Danish Ali Qazi for Appellant.

Haroon Masood, D.R. for Respondent.

Date of hearing: 15th January, 2015.

2015 P T D (Trib.) 2502

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Abdul Nasir Butt, Accountant Member

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

Versus

Messrs IDARE-E-KISAN, LAHORE

M.A. (R) (Suo motu) Nos. 92/LB to 94/LB of 2014 in I.T.As. Nos. 1319/LB to 1321/LB of 2009, decided on 2nd July, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 80(2)(b)(v), 113, 114, 120, 131 & 221(2)---Assessee, an institution registered under the Societies Registration Act, 1980---"Company"---Rectification of order by the Appellate Tribunal---Scope---Returns of income filed by the taxpayer for relevant years, declaring business loss, were treated as assessment in terms of S.120 of Income Tax Ordinance, 2001---Assessing Officer, found that the taxpayer had failed to pay liability of minimum tax under S.113 of the Income Tax Ordinance, 2001, as defined in S.80(2)(b)(v) of the Ordinance---Deemed assessments for the relevant years were rectified under S.221 of Income Tax Ordinance, and minimum tax was charged under S.113 of Income Tax Ordinance, 2001---Taxpayer being aggrieved, filed appeal, assailing the action of Assessing Officer, on the ground that taxpayer was an 'Institution' registered under the Societies Registration Act, 1980 and not company, within the meaning of S.80 of the Income Tax Ordinance, 2001, was not liable to pay minimum tax---Appellate Authority, deleted the minimum tax charged---Validity---Tribunal rejected appeal of the department, which rejection order was matter of rectification under S.221 of Income Tax Ordinance, 2001---Under provisions of S.80(2)(b)(v), a Trust, a Co-operative Society, or a Finance Society, was a "company"---Mistake being apparent on the face of appellate order of the Tribunal, same was rectified in terms of S.221 of the Income Tax Ordinance, 2001 and it was held, that the taxpayer being a 'company' as defined in S.80(2)(b)(v) of Income Tax Ordinance, 2001, was liable to pay minimum tax under S.113---Minimum tax charged by the Assessing Officer, being in accordance with law, was upheld---Consolidated order passed by the Appellate Authority was vacated and appeals of the department, were accepted.

Civil Appeal No.1477 to 1482 dated 7-11-2009; CIR v. Messrs Lahore Cantt. Cooperative Housing Society and 7 others 2009 PTD 799 and CIR (Legal Division), Multan v. Messrs Multan Educational Trust, Multan 2014 PTD 420 ref.

Mrs. Misbah Nawaz, D.R. for Applicant.

None for Respondent.

Date of hearing: 2nd July, 2014.

2015 P T D (Trib.) 2516

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs NISHAT (CHUNIAN) LTD., LAHORE

Versus

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

M.A. (AG) No.66/LB of 2013 in I.T.As. Nos. 675/LB and 986/LB of 2011, decided on 14th May, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 120, 122, 131 & 177---CBR---Circular No.4(7S)ITP/2009 dated 9-1-2010---Filing of income tax return under Universal Self-Assessment Scheme---Selection of case for audit---Amendment of assessment with certain additions---Validity---Return of income filed by taxpayer under Universal Self-Assessment Scheme, was to be treated as assessment in terms of S.120(1) of Income Tax Ordinance, 2001, but taxpayer was selected for audit under S.177(4) of Income Tax Ordinance 2001---Audit proceedings were initiated by concerned Assessing Authority---Assessing Authority amended assessment under S.122(1) of Income Tax Ordinance, 2001 and made certain additions on account of depreciation, financial expenses and other issues---Appeal filed by the taxpayer against said order of Assessing Authority was partially allowed by Appellate Authority and confirmed addition on account of depreciation, gain on sale business assets and research expenses, and remanded the issue of interest on short borrowings to Assessing Authority---Both the taxpayer and the department filed appeals before Appellate Tribunal---Case of the taxpayer was selected for audit on 26-2-2009, and proceedings were finalized on 31-5-2009 much before the issuance of Board's Circular dated 9-1-2010, through which instructions were conveyed to the field formation, that cases of corporation and cases of AOP's, had been selected through random ballot for tax year, 2008 for audit, therefore the cases of audit on any other basis for tax year, 2008 could be closed---Board's instructions would apply to cases of audit selected on any basis other than random ballot for tax year, 2008, which proceedings were pending on the date said instructions were received from the Board---Proceedings in such cases could be closed where proceedings were pending on the date, Board's Circular was received---Such was not the situation in the present case, because Assessing Authority had already finalized the proceedings before Board's instructions were communicated on 9-1-2010---Matter was directed to be treated as closed---Orders of both the authorities below were vacated---Appeal of the taxpayer, having been disposed of on legal grounds, other grounds of appeal were not required to be adjudicated---Appeal of the department having become infructuous, was dismissed, in circumstances.

2012 PTD 693; CIT v. Shahnawaz Ltd. 1993 SCMR 73; Army Welfare Sugar Mills Ltd. v. FOP 1992 SCMR 1652; CIT v. Ellcot Spinning Mills Ltd. (2008) PTD 140(H.C) and Central Board of Revenue and others v. Chanda Motors 1992 PTD 1681 ref.

Messrs Ashraf Engineering Corporation, Lahore v. CIR (2014) 109 Tax 184 (Trib.) and 2012 PTD 693 rel.

Khawaja Muhammad Iqbal for Appellant (in M.A. (A.G) No.66/LB of 2013 in I.T.A. No.675/LB of 2011).

Waqas Rasheed, D.R. for Respondent. (in M.A. (A.G) No.66/LB of 2013 in I.T.A. No.675/LB of 2011).

Waqas Rasheed, DR. for Appellant (in I.T.A. No.986/LB of 2011).

Khawaja Muhammad Iqbal for Respondent (in I.T.A. No.986/LB of 2011).

Date of hearing: 14th May, 2014.

2015 P T D (Trib.) 2531

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member

Messrs WAQAS WOOLLEN MILLS (PVT.) LTD., GUJRANWALA

Versus

C.I.R., R.T.O., GUJRANWALA

M.A. No.101/LB of 2014, decided on 6th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131 & 132---Rectification of order passed by Appellate Tribunal---Application for---Appeal filed by taxpayer had been dismissed by the Appellate Tribunal, observing that representative of the taxpayer had produced only the ledger account of the parties from whom purchases were claimed to have been made and failed to provide even a single receipt of such purchases---Receipts produced by taxpayer pertained to hundreds of purchase receipts, which were claimed to be made from different suppliers by the taxpayer---All said receipts were prepared on blank papers in one person's handwriting, almost with same ink---All said vouchers were made out/prepared by the taxpayer, just to present at belated stage to defraud the department to avoid taxation---Scope of rectification, was very limited; and such power could only be exercised in case of glaring mistakes floating on the surface of the record and could be seen without further investigation, or further probe into the matter by way of entertaining new set of arguments or evidence, which was not earlier furnished, while passing the order against which rectification was moved---Conscious decision having been delivered by the Tribunal while dismissing the appeal of the taxpayer, impugned order of the Tribunal, was not open to any rectification as no "error" therein had been conclusively established by the appellant/taxpayer---Taxpayer had approached Appellate Tribunal with unclean hands---Application for rectification of order was dismissed with compensatory cost, in circumstances.

Abid Hafeez Abid for Appellant.

Mrs. Misbah Nawaz, D.R. for Respondent.

Date of hearing: 4th June, 2014.

2015 P T D (Trib.) 2545

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs EXIM ENTERPRISES, S.M. IKHLAS ROAD, FAISALABAD and others

Versus

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

S.T.A. No.1058/LB of 2013, decided on 7th May, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), 7, 8, 11(2), 33, 34, 36, 45-B & 46---Claim for inadmissible input tax credit---Recovery of amount erroneously refunded---Appeal---Limitation---Adjudicating Authority, vide order-in-original ordered recovery of amount erroneously refunded to taxpayer---Taxpayer being aggrieved of order-in-original, filed appeal before Appellate Authority, which was dismissed, being time-barred---Validity---Appeal before Appellate Authority, under S.45-B of Sales Tax Act, 1990, was to be filed within thirty days, but the same was filed after about 8 months from passing of order-in-original, which was time-barred---Appellate Tribunal declined to disturb the order passed by Appellate Authority, which was maintained.

Messrs Nida-e-Millat, Lahore v. Commissioner 2007 PTD 1387 rel.

Muhammad Akhtar Rana and Mazhar Hussain, ITP for Appellant.

None for Respondent.

Date of hearing: 7th May, 2014.

2015 P T D (Trib.) 2606

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Majid Qureshi, Accountant Member

S.T.As. Nos. 319/IB of 2013 and 24/IB of 2014, decided on 17th June, 2014.

(a) Sales Tax---

----Supply of goods---Services as part and parcel of supply---Scope---Services provided by taxpayer were actually mandatory component of goods supplied by taxpayer and services were part and parcel of supply---Supply of goods was incomplete without service component---Services provided were not independent services---Warranty was given in case of sale of goods and not of services---Taxpayer, in the present case, was making taxable activity by charging a composite price for its final product/supplies---Services, therefore, were integral part of taxable supplies because without such services, supply of material was useless for customers.

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

----S. 7(2)---Recovery of input tax---Requirements---Mandatory requirement for claiming input tax under S. 7(2) of Sales Tax Act, 1990 to hold valid sales tax invoices---Where the taxpayer had admitted that he did not hold any invoices, claim of input tax adjustment could not be allowed.

2010 PTD (Trib.) 2144 and GST 2002 CL 87 (Trib.) ref.

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

----Ss. 74 & 66---Input tax, claim of---Limitation---Condonation of time limit---Section 74 of Sales Tax Act, 1990 provided condonation of time limit, if any---Registered person was directed to follow procedure laid down under Ss. 66 & 74 of Sales Tax Act, 1990 for claiming input tax on subject invoices and department was directed to verify and accept claim of taxpayer, if found valid.

2003 PTD (Trib.) 928 ref.

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

----S. 8(1)(a)---Non-taxable supplies---Input tax, refusal of---According to S. 8(1)(a) of Sales Tax Act, 1990, a registered person was not entitled to reclaim or deduct input tax paid on goods or services used or to be used for any purpose other than for taxable supplies made or to be made by him.

2007 PTD 398; 2007 PTD (Trib.) 139; 2007 PTD 250 (HC); 2005 PTD 2582; 2012 PTD 1635; 2001 PTD 2018; 2003 PTD 1852; 2004 PTD 1987; 2008 PTD 1693; 2002 PTD 976; 2007 SCMR 1705 = 2007 PTD 2275; 2004 PTD (Trib.) 2898; 2006 PTD 2066 and 2003 PTD 1819 ref.

Rashid Qureshi, FCA for Appellant.

Imran Sah D.R. ACMA for Respondent.

Date of hearing: 29th May, 2014.

2015 P T D (Trib.) 2629

[Inland Revenue Appellate Tribunal]

Before Javaid Masood Tahir Bhatti, Chairperson and Fiza Muzaffar, Accountant Member

HONDA FORT (PVT.) LTD.

Versus

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

S.T.As. Nos. 1444/LB to 1448 of 2014, decided on 9th December, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(28), (47), 3, 11, 25(2), 38, 46 & 57---Sales Tax Special Procedure Rules, 2007, Rr.3 & 5(3)---S.R.O. No. 608(I)/2014, dated 2-7-2014---Clarification Letter C. No.3(72) STP/97(PT), dated 2-7-2004--Tax fraud and evasion of sales tax---Appellant company, was an authorized agent of cars manufacturing company and was engaged in the business of delivery of Car manufactured by manufacturer company---Appellant was providing various services to its customers, including service of vehicles, tuning of cars, repair/change of any faulty parts, denting and painting of cars---For conducting said activities, appellant was duly registered as "retailer" under the Sales Tax Act, 1990---Commissioner, received information that, the appellant was involved in tax fraud and had evaded huge tax---Adjudicating Authority, passed orders against appellant directing him to deposit the sales tax adjudged therein along with default charges and penalty---Appellate authority confirmed the findings of Adjudicating Authority---Regarding the issue of non-payment of sales tax on receipts from denting painting, Appellate Authority accepted submission of the appellant---On issue with respect to non-payment of sales tax (supplies difference between sales tax returns and financial statements) Appellate Authority had remanded the case to Adjudicating Authority, with the direction to reconcile the issue with the appellant---Validity---Proceedings in the case were initiated on the basis of information that appellant was involved in tax fraud---Adjudicating Authority, instead of conducting inquiry or investigating in the matter under S.38 of the Sales Tax Act, 1990, directly issued show-cause notice on the basis of the report prepared by his staff, who were not empowered by the concerned authority under S.25(2) of the Sales Tax Act, 1990---Under S.25(2) of Sales Tax Act, 1990, in case of a fraud or evasion of tax, it was the requirement of law that the Commissioner would authorize the officer not below the rank of Assistant Commissioner to conduct inquiry or investigation under S.38 of the Sales Tax Act, 1990, which was not done in the present case---Action on the part of the Departmental Officer in contravention of the provisions of law was illegal and void---Reasons, assigned by the department for charging of sales tax on spare parts at the normal rate, were misconceived against law---No bar existed under the Sales Tax Act, 1990 that a registered person, could not do multiple activities; or if registered under one category, could not make sales/supplies under another category---Any person, could do the activity of retailer, as well as wholesaler, but nowhere, there was a bar that a wholesaler could not indulge into other activities including retail or vice versa---Rule 5(3) of Chapter-II of Sales Tax Special Procedure Rules, 2007 categorically, allowed a retailer to make sales to a person who was to withhold income tax on such sales---Retailer could do business as a wholesaler, but in no way the two categories of sales could be mixed as one, and that too at the discretion of Adjudicating Authority---Charging sales tax on services i.e. denting and painting, was also contrary to clarification---Reconciliation statement, had shown that there was no difference in sales declared in the audited accounts and those of the sales tax returns---Reconciliation of appellant was accepted---Orders of the authorities below were vacated on that issue also---If the department, even after decision of appeals, had any evidence/proof that said reconciliation statement was incorrect and against the record, it could file rectification application under S.57 of the Sales Tax Act, 1990---Penalties imposed on the appellant being consequential were also deleted, in circumstances.

2005 PTD 1933; 2004 PTD 2952 and 2009 PTD 1083 ref.

Iqbal Hashmi for Appellant.

Dr. Javed Iqbal Sheikh (DR) for Respondent.

Date of hearing: 9th December, 2014.

2015 P T D (Trib.) 2644

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

I.T.As. Nos.1006/LB, 1035/LB of 2011 and 792/LB of 2012, decided on 2nd September, 2014.

(a) Income tax---

----Opportunity of being heard---No adverse inference could sustain if a proper opportunity of being heard was not allowed to accused and matters which had not been confronted to taxpayer were unlawful.

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

----S. 153(1)(b)---Payments for services---Reduction, scope of---Rebate was reduction against sale consideration and could not be equated with consideration for services simply for the reason that buyers of goods did not render any services to seller---No logical or sustainable basis existed to treat reduction against sale price as consideration for services, therefore, S. 153(1)(b) of Income Tax Ordinance, 2001 was not applicable.

(c) Taxation--

----Obligations and responsibilities of tax authorities---Appellate Tribunal observed that practice of declaring order of Appellate Authorities per incuriam by Taxation authorities create serious judicial indiscipline---Tax authorities had no lawful mandate to do so as such practice not only tantamount to flout with orders of higher appellate forums but also did not let proceedings come to an end---If such practice was allowed to happen, no proceeding would ever come to closure and tax authorities would stick to their version and repeat the same action by treating appellate orders per incuriam on the basis of their own whims and motions---Only the of higher appellate forums could undertake judicial scrutiny of orders and to either approve or disapprove the same.

Asim Zulfiqar Ali, FCA for Applicant.

Tariq Javed, D.R. for Respondent.

Date of hearing: 7th August, 2014.

2015 P T D 448

[Islamabad High Court]

Before Athar Minallah, J

ARSLAN POULTRY (PVT.) LTD.

Versus

OFFICER INLAND REVENUE and others

Writ Petition No.3869 of 2014, decided on 1st September, 2014.

(a) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope---Alternate remedy---Jurisdiction of High Court under Art. 199 of the Constitution was limited to the extent provided thereunder---Where there was an alternate remedy available, it was the mandate of the Constitution that the High Court shall not exercise its jurisdiction under Art. 199 of the Constitution.

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

----Ss. 131(5), 133 & 132(7)---Constitution of Pakistan, Art 199---Constitutional jurisdiction of High Court---Scope---Petitioner impugning order of Income Tax Appellate Tribunal---Alternate remedy of Reference under S. 133 of the Income Tax Ordinance, 2001 available---Interpretation of S. 131(5) of the Income Tax Ordinance, 2001---Petitioner/assessee impugned order of Appellate Tribunal whereby appeal of petitioner/assessee was disposed of---Contention of the petitioner was that the impugned order had not been passed by the Tribunal under S. 132(7) of the Income Tax Ordinance, 2001, but instead under S. 131(5) of the Ordinance therefore, the case of the petitioner did not fall within the purview of S. 133 of the Income Tax Ordinance, 2001 for filing of reference against the impugned order; thus the alternate remedy of reference was not available to the petitioner and the Constitutional petition was maintainable---Held, that contention that the Tribunal had passed an order under S. 131(5) of the Income Tax Ordinance, 2001 was misconceived and said section started with a non-obstante clause and specifically provided that mere filing of an appeal before the Tribunal could not be construed as suspension of recovery proceedings, unless the said recovery had been stayed by the Tribunal while the appeal before it was pending---Section 131(5) made it mandatory that if the Tribunal refused to stay recovery proceedings, tax shall be payable in accordance with the assessment made in the case---No ambiguity existed in the language of S.131(5) and provisos thereto; and it merely related to the powers of the Tribunal to grant or refuse stay of the recovery of tax, while the main appeal was pending---In the present case, the petitioner's/assessee's main appeal had been disposed of by the Tribunal, therefore the only statutory course available to the petitioner in such circumstances was to file a reference under S.133 of the Income Tax Ordinance, 2001 against order of Tribunal---High Court was duty bound to enforce provisions of the Income Tax Ordinance, 2001 and to give effect to its legislative intent; and since the alternate remedy of filing of reference under S.133 of the Income Tax Ordinance, 2001 was available to the petitioner, therefore, the impugned order was not amenable to the Constitutional jurisdiction of High Court---Constitutional petition was dismissed, in circumstances.

Messrs Zarghoon Zarai Corporation v. Collector of Customs 2006 PTD 534; Z. N. Exports (Pvt.) Ltd. v. Collector of Sales Tax 2003 PTD 1746; Messer Aidy Vee and Co. (Pvt.) Ltd. through Director v. Taxation Officer of Income Tax, Lahore and 2 others 2009 PTD 1715; and Dawood Textile Printing Industries (Pvt.) Ltd., v. Federation of Pakistan through Secretary, Revenue Division, and others 2009 PTD 1220 distinguished.

(c) Administration of justice---

----When the law required an act to be done in a particular way; it had to be done in that manner alone, and such dictate of law could not be termed technical.

Muhammad Anwar and others v. Mst. Ilyas Begum and others PLD 2013 SC 255 rel.

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

----Ss. 133 & 132(7)----Constitution of Pakistan, Art. 199---Exercise of Constitutional jurisdiction of High Court over an order passed by the Income Tax Appellate Tribunal under S. 132(7) of the Income Tax Ordinance, 2001---Availability of alternate remedy of filing of Reference under S. 133 of the Income Tax Ordinance, 2001---Maintainability of Constitutional petition---High Court, by exercising its jurisdiction under Art. 199 of the Constitution would defeat the legislative intent behind S. 133 of the Income Tax Ordinance, 2001 and give rise to an anomaly that when the statute provided for a reference to be filed against order passed by the Appellate Tribunal, restricting it to a question of law arising out of the said order, and to be heard by a Bench of at least two Judges of the High Court, the exercise of the Constitutional jurisdiction of High Court under Art. 199 would defeat the legislative intent and thereby render the statutory provisions as redundant.

Hafiz Muhammad Idrees for Petitioner.

None for Respondents.

Date of hearing: 1st September, 2014.

2015 P T D 550

[Islamabad High Court]

Before Athar Minallah and Noor-ul-Haq N. Qureshi, JJ

Messrs TRAVEL WALJIS (PVT.) LTD.

Versus

COMMISSIONER APPEALS, INCOME TAX, ISLAMABAD and others

T. R. No.29 of 2004, heard on 6th November, 2014.

(a) Interpretation of statutes---

----Remedial/curative provisions---Scope---Remedial enactment is intended to provide relief which was not already provided for---Such remedy is to obviate a defect, anomaly or hardship and is designed to bring existing law in line with intention of legislature---Remedial enactments may also be explanatory in nature or may intend to clarify an existing enactment---Such enactments are liberally construed in favour of assessee---Remedial/curative enactments operate prospectively and 'retrospective legislation is looked upon with disfavour' unless language explicitly indicates intention of legislature to be otherwise---In case of declaratory or clarificatory or remedial enactment any doubt is to be resolved in favour of retrospective operation---Retroactivity cannot operate to destroy, affect or disturb vested rights or if it may cause to create new liabilities---Enactment though remedial in nature does not apply retrospectively to alter or effect proceedings and orders which have been determined by having attaining finality---Unless otherwise provided explicitly, the 'remedial' enactment operates retrospectively in those cases wherein proceedings are pending at the time of amendment---In absence of express words, passed and closed transactions cannot be reopened by operation of an enactment which is of a 'remedial' nature.

Commissioner Inland Revenue Zone-II, Regional Tax Office, Multan v. Mrs. Ambreen Fawad Co. Pak Arab Fertilizers Limited, Multan 2014 PTD 320; Commissioner of Income Tax v. Shahnawaz Ltd., and others 1993 SCMR 73; Commissioner of Income/Wealth Tax Companies Zone-I, Lahore v. Hafeez Valqa Industries (Pvt.) Ltd., Lahore 2005 PTD 2403; C.I.T./W.T., Faisalabad Zone v. Shahzad and Company, Faisalabad 2006 PTD 2436; Dawood Cotton Mills v. Commissioner of Income Tax 2000 PTD 285 and Commissioner of Income Tax v. Nasir Ali and another 1999 SCMR 563 = 1999 PTD 1173 rel.

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

----Ss. 12(12) [as amended by Finance Act (III of 1998)] & 133(4)---Curative/remedial enactment---Retrospective effect---Dispute in question pertained to implication of insertion of proviso to S. 12(12) of Income Tax Ordinance, 1979---Assessee raised the plea that proviso in question was remedial in nature therefore, it was entitled to avail its benefit---Validity---Proviso inserted vide Finance Act, 1998, was remedial enactment and at the time when it came into force, appeal of assessee was pending before Appellate Tribunal---High Court did not support the plea of authorities that assessment order had attained finality, therefore, assessee was not entitled to the benefit under provisions to S.12(12) of Income Tax Ordinance, 1979---Appeal of assessee was pending, therefore, benefit of proviso was applicable as appeal created by statute was continuation of original proceedings---High Court directed that assessee was entitled to benefit of being treated in the light of proviso inserted in S. 12(12) of Income Tax Ordinance, 1979, through Finance Act, 1998---Reference was decided accordingly.

Corpus Juris Secundum Volume 82, (at pages 918 to 922); Understanding Statutes, Canons of Construction by S.M. Zafar, (at pages 202-203 of the revised Eidition, 2008); Craies on Statute Law by S.G.G. Edgar, Seventh Edition (at page 60); Interpretation of Statutes, by D.M. Bukhshi, reprint Edition 2010 (at page 577) and Construction of Statutes by Ear I.-T Crawford, 1940 ref.

Hafiz Muhammad Idress for Applicant.

Hafiz Munawar Iqbal for Respondents.

Date of hearing: 6th November, 2014.

2015 P T D 767

[Islamabad High Court]

Before Noor-ul-Haq N.Qureshi, J

Messrs EMAN ENTERPRISES and others

versus

FEDERATION OF PAKISTAN and others

Writ Petitions Nos. 2859, 2860, 2953, 3954, 3086 and Criminal Original No.395 of 2014, decided on 29th October, 2014.

Sales Tax Act (VII of 1990)---

----Ss.3 & 5---Finance Act (IX of 2014), Preamble---S.R.O. 1125(I)/2011, dated 31-12-2011---S.R.O. 420(I)/2014, dated 4-6-2014---Constitution of Pakistan, Art. 199---Constitutional petition---'Exporters and Importers'---Collection of sales tax before passing of Finance Bill---Contention of petitioners (importers of exporters) was that sales tax was increased from 5% to 17% on import of finished goods for the Financial Year 2014-15 but same had been ordered to be deposited before passing of the Finance Bill for the relevant financial year---Validity---Government intended to charge sales tax at the standard rate of 17% instead of 5% on import of finished articles for the Financial Year 2014-15---Said proposal was to be implemented w.e.f. 1-7-2014---Impugned notification dated 4-6-2014 should have taken effect from 1-7-2014 and not from the date of issuance i.e. 4-6-2014---Collection of sales tax @ 17% i.e. standard rate of sales tax w. e. f. 4-6-2014 was not justified---Collection of sales tax from 5% to 17% w.e.f. 4-6-2014 to 30-6-2014 was declared null and void---Constitutional petitions were accepted in circumstances.

2013 SCMR 1337 and PLD 1965 (W.P.) Pesh. 249 ref.

2013 SCMR 1337 rel.

Naveed Zafar Khan and Tanveer Azam Cheema for Petitioners.

Zahid Idrees Mufti, Raja Muhammad Iqbal and Jahangir Khan Jadoon, Standing Counsel for Respondents.

Date of hearing: 13th October, 2014.

2015 P T D 790

[Islamabad High Court]

Before Athar Minallah, J

EURO DUTY FREE SHOP (PVT.) LTD.

versus

FEDERATION OF PAKISTAN and others

Writ Petition No.3024 of 2014, decided on 23rd June, 2014.

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

----S. 13 (3) & (4)---Constitution of Pakistan, Art. 199---Constitutional petition---Private warehouse license, suspension of---Non-issuance of show cause notice---Effect---Petitioner was maintaining a private bonded warehouse and its license was suspended by authorities without issuing show cause notice to petitioner---Validity---Authorities admitted that obligation of meeting the requirements of due process was not met as no show cause notice was issued to petitioner---High Court declared the order suspending license of petitioner as illegal, arbitrary, passed without lawful authority and jurisdiction and the same was set aside---Authorities were at liberty to proceed in accordance with law, after observing requirements of due process of law---Petition was allowed accordingly.

Muhammad Nadeem Arif and others v. Inspector General of Police, Punjab, Lahore and others 2011 SCMR 408 rel.

(b) Constitution of Pakistan---

----Art. 10-A---Due process of law---"Hearing"---Scope---Hearing is to be meaningful, particularly when some action detrimental to rights of citizens is to be taken---Hearing held in mechanical or perfunctory manner cannot be treated a "hearing" for the purpose of due process of law.

Maqbool Ahmed and others v. District Officer (R) and others PLD 2010 Lah. 332 rel.

Barrister Khurram Hashmi for Petitioner.

Mrs. Misbah Gulnar Sharif for Respondents.

Shahzad Ahmed Superintendent, Customs.

2015 P T D 899

[Islamabad High Court]

Before Athar Minallah, J

COMMISSIONER INLAND REVENUE

versus

OGDCL and others

Writ Petition No.3896 of 2014, decided on 15th September, 2014.

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

----Ss.132 & 133---Constitution of Pakistan, Art.199--- Constitutional petition---Maintainability---"Aggrieved person"---Alternate remedy---Scope---Petitioner, Commissioner Inland Revenue, impugned order of Income Tax Appellate Tribunal by invoking Constitutional jurisdiction of High Court under Art. 199 of the Constitution---Held, that the term "aggrieved person" or an aggrieved party related to a person or a party whose legal right was invaded or whose pecuniary interest was directly affected by a decree or judgment and would mean a private party---Petitioner, in the present case, could not claim to have been wrongfully deprived of anything to which he was legally entitled to and there was no denial of some personal pecuniary or property right or imposition on him of a burden of an obligation---Petitioner, may have been disappointed with the impugned order but had not suffered any personal injury---High Court observed that the petitioner while discharging his official duties under the Income Tax Ordinance, 2001 was not an aggrieved party for purposes of Art.199 of the Constitution---Petitioner also had an alternate statutory remedy to invoke provisions of S.133 of the Income Tax Ordinance, 2001 by filing of reference against order of Appellate Tribunal---Constitutional petition being not maintainable, was dismissed.

Diwan Azmat Said Muhammad v. Haji Bakhtiar Saeed 1996 CLC 1427; Miss Nadra Imam v. The Appellate Committee for permanent Resident Certificate through its Chairman, The Home Secretary, Government of Sindh, Karachi and others PLD 1976 Kar. 851; Director, Directorate General of Intelligence an Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; Director General, Intelligence and Investigation v. Sher Andaz and 20 others 2010 PTD 2006 and Director Directorate General of Intelligence and Investigation, Customs and Excise, Karachi v. Messrs Al-Faiz Industries (Pvt.) Ltd., 2004 PTD 2987 rel.

(b) Administration of justice---

----When law requires an act to be done in a particular manner, it had to be done in that manner alone and such dictate of law would not be termed a mere technicality.

Javed Jabbar and 14 others v. Federation of Pakistan and others PLD 2013 SC 955 rel.

Abdul Shakoor Paracha and Ms. Wajeeha Pervez for Petitioner.

2015 P T D 936

[Islamabad High Court]

Before Athar Minallah and Amer Farooq, JJ

Messrs WATEEN TELECOM LTD.

versus

COMMISSIONER INLAND REVENUE and others

FERA No.1 of 2013, heard on 4th February, 2015.

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

----Ss. 132, 131 & 133---Disposal of appeal by the Appellate Tribunal---Practice and procedure---Statutory duty upon the Appellate Tribunal to "decide" an appeal---Legislative intent behind S. 132 of the Income Tax Ordinance, 2001---Reference to High Court---Scope---Question before the High Court was as to whether the Income Tax Appellate Tribunal, while deciding nine appeals, was justified in failing to advert to the facts and circumstances of each appeal/case and whether the order of the Appellate Tribunal could be termed as a "judgment" or "order" under the provisions of S. 132 of the Income Tax Ordinance, 2001---Held, that decision or determination of the Income Tax Appellate Tribunal on a question of fact attained finality thereby making the said Tribunal the final forum in such regard and failure to advert to a question raised before the Tribunal in itself was a question of law---Legislative intent behind S. 132 of the Income Tax Ordinance, 2001 envisaged a clear, definite and conscious determination and decision on all matters raised before the Tribunal in an appeal and contemplated application of mind and giving reasons for any determination or decision made by the Tribunal after affording an opportunity of hearing to the parties---Appellate Tribunal under S. 132 of the Income Tax Ordinance, 2001 was under a statutory duty to decide an appeal and give its decision in writing and if relevant facts were not taken into consideration or deliberated upon, and the reasons for or against had not been weighed, then it could not be said that the Tribunal had "decided" an appeal and any purported order or judgment without "deciding" the appeal would be a nullity in law---High Court observed that if the Tribunal failed to advert to a question of law or fact raised before it or before any other forum under the relevant statute, it was to be treated as a question of law for the purposes of S.133 of the Income Tax Ordinance, 2001---In the present case, in each appeal; the facts, nature of transaction and contractual relationship between the parties was distinct and separate and the same was also acknowledged by the Tribunal---Tribunal was required to decide the separate appeals by affirming, annulling, varying or amending the impugned orders rather than restricting itself to mere interpretation---Held further that the impugned order of the Appellate Tribunal was not an "order" or "judgment" passed by the Tribunal in terms of S. 132 of the Income Tax Ordinance, 2001 as it failed to advert to the facts and nature of transaction in each case, and consequently failed to "decide" the appeals separately as required under S. 132 of the Income Tax Ordinance, 2001---Impugned order of Appellate Tribunal was set aside, and matter was remanded---Reference was answered accordingly.

(b) Words and Phrases---

----"Decide"---Meaning of---To decide meant to deliberate, to weigh the reasons for and against, to see which preponderate and to be governed by such preponderance.

Balck's Law Dictionary, Sixth Edition rel.

(c) Words and Phrases---

----"Decision"---Meaning---Decision was defined as a determination arrived at after consideration of facts and in the legal context, the law---"Decision" may be explained as a finding and conclusion of law, which must be in writing.

Balck's Law Dictionary, Sixth Edition and Quoting Wilcox v. Sway 160 P.2d 154 rel.

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

----Ss. 132 & 131---Sales Tax Act (VII of 1990) S. 46---Customs Act (IV of 1969) S.194---Federal Excise Act (VIII of 2005), Ss.34 & 2(3)---Constitution of Pakistan, Art.199---Constitutional jurisdiction of High Court---Scope---Appellate Tribunal of Inland Revenue---Statutory duty cast upon Appellate Tribunal, Inland Revenue for adjudication of appeals---Nature, scope and importance of such adjudication---Bar of statutory duty was high on appellate forums provided under the Federal Excise Act, 2005, the Sales Tax Act, 1990, the Customs Act, 1969 and the Income Tax Ordinance, 2001---Appellate Tribunal, being the last forum for determination of questions of fact undoubtedly carried a heavy burden of discharging its functions in a fair, just and transparent manner and particularly observing the requirements of due process and deciding appeals as provided under relevant provisions---Levy of charge or payment of tax or duty imposed a financial burden and therefore role of Appellate Tribunal as the last statutory forum assumed greater importance---Jurisdiction of High Court under Art.199 of the Constitution was barred when a statute provide an adequate remedy and the role of the Appellate Tribunal of Inland Revenue which exclusively heard and decided appeals became crucial in ensuring the interests and rights of taxpayers were safeguarded and that they remained protected from being saddled with illegal, arbitrary and unwarranted imposition of financial burden and for such reason higher duty of care was to be exercised by adjudicating officers and the statutory appellate forums by, inter alia, taking into consideration all the matters before them, whether relating to facts or law and after thorough deliberation, manifesting application of mind and deciding appeal by delivering a reasoned judgment / order.

Hafiz Muhammad Idrees for Applicant (in FERA Nos. 1, 2, 3 and 4 of 2013).

Anwar Kamal and Muhammad Umar Khan Vardag for Applicants (in FERA Nos. 5, 6 and 7 of 2013).

Hafiz Munawar Iqbal and Sikandar Naeem Qazi for Respondents.

Date of hearing: 4th February, 2015.

2015 P T D 1058

[Islamabad High Court]

Before Aamer Farooq, J

Messrs BANNU WOOLLEN MILLS LTD.

versus

FEDERATION OF PAKISTAN and 2 others

Writ Petition No.3367 of 2011, heard on 17th February, 2015.

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

----S. 13(2)---Constitution of Pakistan, Art.199---S.R.O. No.165(I)/ 2010, dated 10-3-2010---S.R.O. No.180(I)/2011, dated 5-3-2011---Constitutional petition---Sales Tax exemption granted vide S.R.O. No.165(I)/2010, dated 10-3-2010---Petitioner impugned actions of the Department whereby the petitioner was denied concession/sales tax exemption available vide S.R.O. No.165(I)/2010 dated 10-3-2010 on the basis that S.R.O. 180(I)/2011 dated 5-3-2011 which superseded S.R.O. No.165(I)/2010 dated 10-3-2010 and reduced the rate of the exemption; was applicable to the petitioner---Contention of the petitioner was that vide judgment of the Peshawar High Court in Writ Petition declared on 23-12-2014 reported as 2015 PTD 734; S.R.O. No.180(I)/2011, dated 5-3-2011 was declared illegal and that the said judgment was a judgment in rem and not in personam, therefore the petitioners were entitled to the benefit of the S.R.O. 165(I)/2010 dated 10-3-2010---Held, that the effect of the judgment of the Peshawar High Court was that S.R.O. 180(I)/2011, dated 5-3-2011 was illegal and the operation of the judgment of Peshawar High Court was in rem; and petitioners were entitled to the benefit under S.R.O. No. 165(I)/2010, dated 10-3-2010---Constitutional petition was allowed, accordingly.

2015 PTD 734; Pir Bukhsh v. Chairman Allotment Committee PLD 1987 SC 145 and Ijaz Rasool v. Member National Industrial Relations Commission and 5 others 2014 PLC (C.S.) 288 rel.

(b) Precedent---

----Judgment "in rem" and judgment "in personam"---Concept, distinction and scope examined.

Pir Bukhsh v. Chairman Allotment Committee PLD 1987 SC 145 and Ijaz Rasool v. Member National Industrial Relations Commission and 5 others 2014 PLC (C.S.) 288 rel.

Ishtiaq Ahmed for Petitioner.

Saeed ur Rehman for Respondent No.3.

Naziran Malik for Respondent No.2.

Syed Hasnain Ibrahim Kazmi, Deputy Attorney-General for Respondent No.1.

Date of hearing: 17th February, 2015.

2015 P T D 1169

[Islamabad High Court]

Before Athar Minallah and Aamer Farooq, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE, ISLAMABAD

versus

Messrs GEOFIZYKA KRAKOW PAKISTAN LTD., ISLAMABAD

Tax Reference No.16 of 2005, decided on 16th February, 2015.

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

----Ss. 163 & 24---S.R.O. 438(I)/76 dated 6-5-1976---Agreement between Islamic Republic of Pakistan and the Polish People's Republic for avoidance of double taxation, Art. 7(3)---Double taxation agreements to prevail over local income tax laws in accordance with S.163 of the Income Tax Ordinance, 2001---Interpretation of S. 163 of the Income Tax Ordinance, 1979---Question before the High Court was whether in the light of S. 163 of the Income Tax Ordinance, 1979, the Avoidance of Double Taxation Agreement between Pakistan and Poland, notified vide. S.R.O 438(I)/76 dated 6-5-1976 would take precedence over local income tax provisions---Held, that examination of provisions of S. 163 of the Income Tax Ordinance, 1979 made it clear that the Avoidance of Double Taxation Agreement took precedence over local income tax laws with respect to the issues provided in S. 163 of the Income Tax Ordinance, 1979 provided that Agreement was made as required in S. 163(1) of the Income Tax Ordinance, 1979 and was notified---Section 163(2) of the Income Tax Ordinance, 1979 contained a non-obstante clause as it stated that notwithstanding anything contained in any law for the time being in force, the provisions of the Avoidance of Double Taxation Agreement shall prevail----In the present case, therefore, Art. 7(3) of the Avoidance of Double-Taxation Agreement entered between Islamic Republic of Pakistan and the Polish People's Republic would prevail over S. 24 of the Income Tax Ordinance, 1979---Reference was answered accordingly.

(b) Interpretation of statutes---

----Non-obstante clause---Concept, scope and purpose---Non-obstante clause was usually used in a provision to show the intention of the Legislature that the provision in question should prevail despite anything to the contrary---Purpose of non-obstante clauses was that the Legislature intended that a particular provision which started with the word "notwithstanding", should prevail over any other inconsistent provision(s).

Muhammad Mohsin Ghaman and others v. Government of Punjab through Home Secretary Lahore and others 2013 SCMR 85 and Arif Hussain Shah v. Operation Director PLD 1979 Lah. 603 rel.

Babar Bilal for Petitioner.

Hafiz Muhammad Idrees for Respondent.

Date of Decision : 16th February, 2015.

2015 P T D 1219

[Islamabad High Court]

Before Athar Minallah, J

Messrs PUNJAB OIL MILLS LTD.

versus

FEDERATION OF PAKISTAN and others

Writ Petition No.1826 of 2012, C.M. Nos.2 of 2012 and 618 of 2015, decided on 24th March, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(9) & 122A----Constitution of Pakistan, Art. 199---Constitutional jurisdiction of High Court---Scope---Show-cause notice for amendment/revision in assessment---Petitioner/taxpayer impugned issuance of show-cause notice under S. 122(9), read with S. 122A, of the Income Tax Ordinance, 2001 on the ground, inter alia, that the question raised in the show-cause notice had already been settled, therefore, it would be a waste of time for the petitioner to join the proceedings---Held, that contention of petitioner was not tenable as the petitioner had neither filed its reply to the show cause notice nor had appeared before the issuing authority---Jurisdiction of High Court under Art. 199 of the Constitution could not be exercised in case of a show-cause notice, merely on basis of assumptions and speculations---High Court could not assume any mala fide on part of the authority which had issued the show cause notice and the power of the authority was vested in it by legislation and it was expected that a statutory authority would exercise its powers in accordance with the law and principles---Constitutional petition was therefore, not maintainable.

1990 PTD 155 ref.

Sajid Ijaz Hotiana for Petitioner.

Babar Bilal for Respondents.

Malik Zahoor Ahmed Awan, Standing Counsel.

2015 P T D 1639

[Islamabad High Court]

Before Noor-ul-Haq N. Qureshi, J

Messrs BAHRIA TOWN (PVT.) LTD.

versus

FEDERATION OF PAKISTAN through Chairman, Federal Board of Revenue and 2 others

W. Ps. Nos. 1399 and 1033 of 2014, decided on 29th January, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 122(9) & 177---Constitution of Pakistan, Art.199---Constitutional petition---Amendment in assessments---Further amendments---Petitioner/taxpayer impugned show-cause notice under Ss. 122(9) & 122(5A) of the Income Tax Ordinance, 2001 inter alia on the ground that said show-cause notice was for the purpose of audit/verification of books of the taxpayer and could only have been issued under Ss. 177 & 213C of the Income Tax Ordinance, 2001; and that any reason to hold already completed assessment as erroneous or prejudicial to the interest of the revenue, must be definite and visible from the order sought to be amended, but the same was missing in the present case---Held, that perusal of impugned show-cause notice revealed that only submission of certain documents were required by the Additional Commissioner with regard to an inquiry in order to ascertain the correct position of the revenue and furthermore, reasons for said inquiry had been given in detail in the said show-cause notice---Contention of petitioners that the impugned show-cause notice had been issued to amend already deemed assessment was not correct; as inquiry was to be first held then any conclusion with regard to amendment in assessment would be taken, which may be assailed under the proper forum provided under the law --High Court observed that under the law, it was necessary that the reason to hold already completed assessment as erroneous and pre-judicial to the interest of revenue must be definite and visible from the order sought to be amended, and the same was definite and visible in the present case---Constitutional petition was dismissed, in circumstances.

Collector of Customs and others v. Maple Leaf Cement Factory Ltd. 2012 SCMR 409 rel.

Syed Taqueer Bukhari for Petitioners.

Dr. Farhat Zafar and Sh. Anwaar-ul-Haq, Babar Bilal and Abdullah Alim Qureshi for Respondents.

2015 P T D 1790

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

Messrs BAHRIA TOWN (PVT.) LTD.

versus

FEDERATION OF PAKISTAN through Chairman Federal Board of Revenue

W.Ps. Nos. 3024, 3207, 3028 and 3081 of 2013, decided on 12th June, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S. 177---Constitution of Pakistan, Art. 199---Constitutional petition---Audit, selection for---Company maintaining double accounts---Commissioner (Inland Revenue) selected petitioner-company for audit on the basis of a report prepared by an Inquiry Commission on the directions of the Supreme Court---Held, that the Commissioner was vested with vast powers to ask for audit of any person's income tax affairs on the basis of credible information---Inquiry Commission, in the present case, found huge differences between the statements of income tax return filed before the Federal Board of Revenue and that filed before the Securities and Exchange Commission of Pakistan---Such an anomaly could only be removed by way of conducting an audit---Commissioner, in the present case, had rightly proceeded in the matter by selecting petitioner-company for audit---Audit by itself was not an adverse act and through notice sent to petitioner-company, it had not been called upon to pay the tax or any penalty, but was provided with an opportunity to establish, that returns submitted by it were not the result of any misrepresentation, cheating or fraud, rather were true facts recorded in the account books---Constitutional petition was dismissed accordingly.

Barrister Gohar Ali Khan and Syed Tauqeer Bukhari for Petitioner.

Babar Bilal and Abdullah Alim Qureshi for Respondents.

Date of hearing: 28th May, 2015.

2015 P T D 1921

[Islamabad High Court]

Before Athar Minallah and Aamer Farooq, JJ

COMMISSIONER OF INCOME TAX

versus

GAMMON PAKISTAN LIMITED

Tax Reference No.32 of 2004, heard on 10th February, 2015.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 80-C---Re-opening of case---Scope---Authorities were aggrieved of order passed by Income Tax Appellate Tribunal declaring that provisions of S. 66-A of Income Tax Ordinance, 1979, could not be invoked in cases which were covered under S. 80-C of Income Tax Ordinance, 1979---Validity---Protection provided to assessment made under S. 80-C meant that the same could not have been opened under any other provision of Income Tax Ordinance, 1979, including S.66-A--High Court declined to interfere in decision of Income Tax Appellate Tribunal as the same was correct and Inspecting authority could not have opened the assessment made under S. 80-C of Income Tax Ordinance, 1979---Provisions of S. 66-A could not be invoked in cases covered under S. 80-C---Reference was dismissed in circumstances.

Elahi Cotton v. Commissioner of Income Tax PLD 1997 SC 582; Arif Hussain Shah v. Operative Director, Administration, Electric Equipment Manufacturing Co. Ltd., and others PLD 1979 Lah. 603 and Muhammad Mohsin Ghummon and others v. Government of Punjab and others 2013 SCMR 85 ref.

Dr. Farhat Zafar and Sheikh Anwar ul Haq for Applicant.

Shoaib Abbas for Respondent.

Date of hearing: 10th February, 2015.

2015 P T D 2004

[Islamabad High Court]

Before Athar Minallah, J

Messrs ADVANCE BUSINESS SYSTEM and others

versus

FOP and others

W.P. No.483 of 2015, heard on 5th June, 2015.

Sales Tax Act (VII of 1990)---

----Ss.11 & 37-A---Constitution of Pakistan, Art. 199---Constitutional petition---Quashing of FIR by the department---Proceedings on adjudication side---Term "tax due"---Scope---Petitioners were registered under Sales Tax Act, 1990, and sought quashing of FIR against them---Plea raised by petitioners was that authorities did not have jurisdiction to register criminal case prior to completion of proceedings on adjudication side---Validity---Proceedings by departmental authorities under S. 11 of Sales Tax Act, 1990, to assess tax and criminal proceedings under S. 37-A, of Sales Tax Act, 1990, were not inter-dependent---Authorities notified under the Act had powers to proceed under both the provisions simultaneously and independent of each other---Term "tax due" appearing under S.37-A(4) of Sales Tax Act, 1990, had reference to such amount of tax as could be determined at such stage by relevant authorities and uncontested by person liable to pay---Such determination of tax had no nexus with assessment and recovery proceedings under S. 11 of Sales Tax Act, 1990---FIR had been registered and proceedings were pending, therefore, High Court declined to quash the FIR as the same was registered by officers who were competent and vested with jurisdiction in such regard---Petitioners had alternate remedies available to them under the law before Trial Court---Petition was dismissed in circumstances.

Taj International (Pvt.) Ltd. and others v. The Federal Board of Revenue, and others W.P. No. 5047 of 2012 distinguished.

Shafqat Mehmood Chohan and Abdul Qadoos Mughal for Petitioners.

Hafiz Ahsan Ahmed Khokhar, Hassan Bin Izhar, Assistant Director, I&I-IR and Aamir Ilyas, Deputy Director for Respondents.

Date of hearing: 5th June, 2015.

2015 P T D 2067

[Islamabad High Court]

Before Aamer Farooq and Athar Minallah, JJ

COMMISSIONER OF INCOME TAX COMPANIES ZONE, ISLAMABAD

versus

Messrs GEOFIZYKA KRAKOW PAKISTAN LTD., ISLAMABAD

Tax Reference No.16 of 2005, decided on 16th February, 2015.

(a) Interpretation of statutes---

----Non-obstante clause---Effect---Non-obstante clause is usually used in a provision to show intention of Legislature that provision in question should prevail despite anything to the contrary.

Muhammad Mohsin Ghaman and others v. Government of Punjab through Home Secretary Lahore and others 2013 SCMR 85 and Arif Hussain Shah v. Operation Director PLD 1979 Lah. 603 rel.

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

----Ss.24(i), 62 & 163---Avoidance of Double Taxation between Islamic Republic of Pakistan and Polish People's Republic, Art.7(3)---Notification S.R.O. 430(I)76, dated 6-5-1976---Avoidance of Double Taxation Agreement---Income Tax authorities were aggrieved of decision made by Income Tax Appellate Tribunal declaring that in view of Art. 7(3) of Double Taxation Agreement, Pakistan Tax Laws were not applicable to assessee---Validity---Avoidance of Double Taxation Agreement, under the provisions of S. 163(2) of Income Tax Ordinance, 1979, should prevail over other provisions of law with respect to issues provided in clauses 'a' to 'e' of S. 163(2) of Income Tax Ordinance, 1979---Provisions of Art. 7(3) of Double Taxation Agreement, prevailed over S. 24 (i) of Income Tax Ordinance, 1979---'Double Taxation Agreement', if was in accordance with Ss. 163(1) and 163(2) of Income Tax Ordinance, 1979, the same would prevail over Pakistan's Income Tax Laws---High Court declined to interfere in order passed by Income Tax Appellate Tribunal---Reference was disposed of accordingly.

Babar Bilal for Petitioner.

Hafiz Muhammad Idrees for Respondent.

2015 P T D 2304

[Islamabad High Court]

Before Noor-ul-Haq N. Qureshi and Shaukat Aziz Siddique, JJ

DEWAN SALMAN FIBRE LTD. and others

Versus

FEDERATION OF PAKISTAN, through Secretary, M/O Finance and others

Intera Court Appeal No.82 of 1997, W.Ps. Nos. 287 and 1105, of 1996, decided on 14th May, 2015.

(a) Good governance---

----Sovereign commitments---Scope---Great importance is attached to government adhering to sovereign commitments made by it, whether in the form of statutory orders or notifications issued by it or in the shape of policies announced by it---Commitment made on behalf of government should neither be lightly disregarded nor deliberately ignored---Orderly development of a civilized society requires that citizens should be entitled to place implicit faith and confidence on representations which are made by or on behalf of duly constituted governmental authorities.

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

----S.21---Locus poenitentiae, principle of---Scope---Mere fact that power to withdraw exemption notification exists with government does not necessarily imply that such power should be exercised---Such power cannot be exercised in violation of settled principles of law and it should only be utilized for valid and sufficient reasons and in furtherance of justifiable policy objectives.

(c) Administration of justice--

--What cannot be done directly can also not be done indirectly.

AIR 1949 Privy Council 190; Madden v. Nelson and For Shppeard Respondent Co. 1899 A.C. 626 at P 627 and Dagl Baloch v. Government of Pakistan PLD 1968 SC 313 rel.

(d) Notification--

--Retrospective effect---Principle---Notification which purports to impair an existing or vested right or imposes a new liability or obligation cannot operate retrospectively in absence of legal sanction.

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

----Ss. 2 (26) (42) & 7 (2)(iv)---Protection of Economic Reforms Act (XII of 1992), S. 6---S.R.O. No.477(1)/1995, dated 14-6-1995---S.R.O. No. 515(1)/95, dated 14-6-1995---Constitution of Pakistan, Art. 199---Law Reforms Ordinance (XII of 1972), S. 3---Intra-court Appeal---Exemptions, withdrawal of---Grievance of appellant company was that exemptions granted by law could not be withdrawn with executive notifications-Validity---If an exemption from payment of excise duty or any other tax was granted for a specified period on certain conditions and if a person had fulfilled those conditions, such person acquired a vested right and he could not be denied the exemption before expiry of such specified period through an executive instrument like a notification but he could be denied his vested right by a legislative provision such as (disputed) amendments in sections 2 and 7 of Sales Tax Act, 1990---Appellant fulfilled all his obligations to avail facility/incentive of exemption from sales tax and there was no fault on its part in discharge of its obligations was made out from record---Appellant established its two units in specified area within the stipulated period i.e. before 30-6-1996 and those units had started production before the target date---When exemption from some tax was matured in a vested right, it could not be subsequently withdrawn through exercise of any executive authority in the garb of notifications and thereafter it could only be withdrawn through legislation---Any excessive amount received by authorities after issuance of disputed notifications was to be refunded to appellant---Division Bench of High Court declared disputed notifications illegal and ineffective on the rights of appellant and set aside judgment passed by Single Judge of High Court---Intra-court appeal was allowed in circumstances.

1998 SCMR 1404; 1992 SCMR 1652; PLD 1997 SC 582; 2009 PTD 1902; 2005 PTD 2505 and 1999 SCMR 1072 rel.

1999 MLD 2994; 2002 PTD 2874; 2000 SCMR 814; PLD 1998 SC 64; 2001 PTD 1; 2011 SCMR 551; PLD 2011 SC 811; PLD 1968 SC 313; 2011 CLC 130; PLD 2011 Kar. 400; 2010 CLD 988; 1982 SCMR 833, PLD 1991 (SC) 546; 1999 SCMR 412 1997 SCMR 641; Al Samrez Enterprises's case 1986 SCMR 1917; (1947 I.K.D. 130) and 1986 SCMR 916 ref.

Sikandar Bashir Mohmamad, Hamid Ahmad, Mustafa Aftab Sherpau, Nasir Mehmood and Mumtaz Niazi for Petitioners.

Hafiz Munawar Iqbal, Mazhar-ul-Haq Hashmi and Anwar Ali Khan for Respondents.

Afnan Karim Kundi, A.A.-G.

Jehangir Khan Jadoon, learned Standing Counsel.

Date of hearing: 10th March, 2015.

2015 P T D 2477

[Islamabad High Court]

Before Aamer Farooq and Athar Minallah, JJ

COMMISSIONER INLAND REVENUE (ZONE-I)

Versus

Messrs ASKARI SOVEREIGN CASH FUND, ISLAMABAD

T.R. No.88 of 2014, decided on 14th May, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 131, 132 & 133---Reference---Maintainability---Interim order---Scope---Income tax authorities were aggrieved of interim order passed by Appellate Tribunal whereby stay order in favour of respondents was confirmed---Validity---In S.133 of Income Tax Ordinance, 2001, words used were "such order" of Tribunal which implied that order of Appellate Tribunal passed under S. 132(6) of Income Tax Ordinance, 2001, was being referred to and that was the final order which involved any question of law---Authorities filed reference with respect to interim orders confirming stay granted to respondents and appeal was not decided and reference was not filed against final order/decision of the Tribunal---Reference was dismissed in circumstances.

Hafiz Muhammad Iqbal for Petitioner.

2015 P T D 22

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Aqeel Ahmed Abbasi, JJ

COLLECTOR OF CUSTOMS through Additional Collector of Customs

Versus

Messrs KHAS TRADING CO.

Special Custom Reference Applications Nos.277 and 330 of 2012, decided on 5th September, 2014.

(a) Administration of justice---

----Order, set aside by Court/any forum---Effect---Once an order has been set aside by a competent court of law, the same is to be treated as never to have remained in field---Such order cannot be claimed to be valid for any purpose, including for the period to it being set aside.

Sadia Jabbar and 3 others v. Federation of Pakistan and others 2012 SCMR 617 rel.

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

----S.196---Valuation Ruling---Pending proceedings---Amendment during proceedings---Retrospective effect, question of---During pendency of proceedings initiated by importer, new Valuation Ruling was issued by authorities and importer was given benefit of new Valuation Ruling---Plea raised by customs authorities was that such benefit had given retrospective effect to Valuation Ruling---Validity---Valuation Ruling in question was issued during pendency of case of importer, which was still pending and yet to be finalized and was in continuation of earlier Valuation Ruling and proceedings---Importer could not be deprived of benefit of the same, as it would amount to gross injustice to importer and defeat principles of natural justice---Importer, from day one was contesting the matter and once matter had been finally decided in favour of importer by issuance of Valuation Ruling in question, importer could not be denied benefit of the same---Such was not a question of giving any retrospective effect to Valuation Ruling, rather was a case of application of Valuating Ruling to pending proceedings---As to whether any retrospective effect was to be given to subsequent Ruling or not was immaterial---Order passed by Customs Appellate Tribunal did not suffer from any illegality nor any negligence was committed by the Tribunal in passing order in question---Reference was dismissed in circumstances.

Sadia Jabbar and 3 others v. Federation of Pakistan and others 2012 SCMR 617; Qaiser Brothers (Pvt.) Ltd. Karachi v. Controller of Customs Valuation, Customs House Karachi and 3 others 2005 PTD 2543 and Bilal Enterprises v. Federation of Pakistan 2013 PTD 1332 ref.

Kashif Nazeer for Applicant.

Faiz H. Shah for Respondent.

Date of hearing: 12th August, 2014.

2015 P T D 134

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs SIDDIQ TRADERS

Versus

DEPUTY COLLECTOR CUSTOMS APPRAISEMENT-IV, CUSTOMS HOUSE, KARACHI and 2 others

Special Customs Reference No.256 of 2012, decided on 3rd October, 2014.

Customs Act (IV of 1969)---

----S. 196---Reference to High Court----Scope---Taxpayer had raised questions with regard to merits of case in the present Reference to High Court under S. 196 of the Customs Act, 1969---Contention of Department was that such reference on merits of the case was not valid after matter had been remanded by Appellate Tribunal to Adjudicating Officer for decision afresh---Held, that perusal of order of Appellate Tribunal revealed that no finding with regard to merits of the case or on questions proposed in present reference had been recorded in said order for the valid reason that Appellate Tribunal had set aside impugned orders on ground that deciding more than one appeal through common order by giving effect to other cases mutatis mutandis had been deprecated by Superior Courts, and therefore Appellate Tribunal had remanded matter back to Adjudicating Officer for decision afresh---No error therefore existed in impugned order of Appellate Tribunal and therefore questions proposed by taxpayer in the reference did not arise from impugned order as there was no finding on issues---High Court observed that in case of remand of the case for a decision afresh, the only question that could have arisen from such order of remand, would be that under facts and circumstances of the case, whether the Appellate Tribunal was justified to remand the matter to the Adjudicating Authority to decide same afresh, which was not proposed in the present case---In case of remand, no question of law arises particularly when adverse order against taxpayer had been set aside, and no adverse order remained in field, therefore, a party could not be treated as an aggrieved party nor there remained anything to be decided by the High Court in terms of S, 196 of the Customs Act, 1969---Reference, being not maintainable, was dismissed in circumstances.

Messrs Pakistan Telephone Cables (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 2849; Commissioner of Income Tax v. Electronic Industries Ltd., Karachi 1988 PTD 111 and E.M. Oil Mills and Industries Ltd. v. Commissioner of Income Tax, Audit Division II, Companies III, Karachi 2011 PTD 2708 rel.

Muhamamd Afzal Awan for Applicant.

Khalid Mehmood Dhoon for Respondents.

Date of hearing: 3rd October, 2014.

2015 P T D 160

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zafar Ahmed Rajput, JJ

Messrs MARITIME AGENCIES (PVT.) LTD. through Company Secretary, Versus

ASSISTANT COMMISSIONER-II OF SRB and 2 others

Constitutional Petition No.D-769 of 2014, decided on 24th April, 2014.

Sindh Sales Tax on Services Rules, 2011--

----R.32---Constitution of Pakistan, Art. 199---Constitutional petition---Show cause notice---Effect---Assessee was aggrieved of issuance of show cause notice to charge entire amount of income of assessee which also included fee and agency receipts---Validity---No final adjudication on proposed show cause notice had been made so far by the authorities and merely a show cause notice had been issued---Constitutional petition was pre-mature as no cause of action had accrued to assessee which could justify filing of petition---High Court declined to interfere in the show cause notice issued by the authorities---Petition was dismissed in circumstances.

2010 SCMR 984 ref.

Messrs Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090 and Messrs Sitara Chemical Industries Ltd. and another v. Deputy Commissioner of Income-Tax 2003 PTD 1285 rel.

Emadul Hassan for Petitioner.

Zainuddin Shaikh for Respondents Nos. 1 and 2.

Saifullah, A.A.-G. for Respondent No.3.

Date of hearing: 24th April, 2014.

2015 P T D 181

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs BAIG ENTERPRISES AND ENGINEERING through Attorney

Versus

FEDERATION OF PAKISTAN through Secretary and 2 others

Constitutional Petition No.D-4353 of 2014, heard on 22nd September, 2014.

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

----S.17---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Administration of justice---Petitioner though had complied with all requisite formalities, petitioner's consignment was detained at port without issuance of any show-cause notice or assigning any other reason thereof in justification of such action---Petitioner under such circumstances where neither any show-cause notice was issued nor any appropriate action in accordance with law had taken place by authorities, was left with no other remedy and had rightly invoked jurisdiction of High Court under Art. 199 of the Constitution---Petition was maintainable in circumstances.

(b) Imports and Exports (Control) Act (XXXIX of 1950)---

----S.3---Customs Act (IV of 1969), S.16---Import and export control---Customs authorities, role of---Federal Government has exclusive jurisdiction to prohibit and or regulate export and import of goods under S. 3 of Import and Export (Control) Act, 1950---Customs authorities or for that matter Federal Board of Revenue is not empowered to restrict or ban import or export of goods under Customs Act, 1969 or rules made thereunder.

Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Private) Limited, Peshawar and others 2003 SCMR 370 rel.

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

----Ss.14-A & 16---Import Policy Order, 2013, Para 9 (ii)(5)---Constitution of Pakistan, Art.199---Constitutional petition---Assessment of goods---Presumptive objection---Apprehensive use---Issuance of show-cause notice during proceedings before High Court---Grievance of petitioner was that Concrete Mixer trucks imported as specialized mounted machinery and transport equipment were not cleared by customs authorities on the plea that the trucks would be used for transportation of goods---Validity---Ministry of Commerce had given its opinion in favour of petitioner and there was no justifiable reason for not following such directions by customs authorities---Objections raised by customs authorities were based on presumption and possibility of subsequent misuse of Concrete Mixers by petitioner---Customs authorities were required to make assessment of goods on the basis of goods "as presented" and not on apprehension that subsequent to clearance the goods would be put to some other use---Issuance of show-cause notice during pendency of present petition and after passing of four months of illegal detention of petitioner's consignment at port, was an attempt to justify illegal detention of consignment without any reason or justification---High Court declared show-cause notice as void ab-initio and that the same could not be acted upon any further---High Court directed customs authorities to release trucks imported by petitioner after payment of necessary duties and taxes applicable thereon---High Court also directed the customs authorities to issue delay and detention certificate in terms of S. 14-A of Customs Act, 1969---Petition was allowed in circumstances.

Messrs Elga Controls through Proprietor v. Federation of Pakistan through Secretary, Ministry of Commerce, Islamabad and 6 others 2010 PTD 487 fol.

Ashikue Raza for Petitioner.

Dilawar Hussain, Standing Counsel for Respondent No.1.

Mrs. Masooda Siraj, along with Ilyas Ahsan Law Officer and Abdul Aziz Appraising Officer for Respondents No.2.

Date of hearing: 22nd September, 2014.

2015 P T D 245

[Sindh High Court]

Before Munib Akhtar, J

PAKISTAN INTERNATIONAL AIRLINES CORPORATION through Secretary PIA

Versus

PAKISTAN through Secretary, Islamabad and 2 others

C.M.As. Nos.4214, 4282 of 2014, C.M.A. No. 5749 in Suit No.554 of 2014 and C.M.A. No.13498 in 1543 of 2013, decided on 14th November, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 3, 4 & 51---Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2---Specific Relief Act (I of 1877), Ss.42 & 54---Suit for declaration and injunction---Interim injunction, grant of---Sales tax on leased aircrafts---Plaintiffs were airline companies who sought aircrafts on lease basis for flight operations---Authorities demanded sales tax on the aircrafts---Validity---Normally taxpayer should be left to make his way through statute and its remedies, paying tax at stipulated point and then asking for a refund, if such had arisen at appropriate stage and from concerned statutory authority---Where adjustment mechanism of output tax minus input tax was a basic feature of statute, the nature of goods remained unaltered throughout and prima facie the facts would spell out that there was no ultimate tax liability---No valid or useful purpose would be served in insisting upon a mechanical application of statutory procedure---Enrichment of State and concomitant impoverishment of taxpayer, even if only temporary could be regarded as unjust---Such was the relief that the statute could not give but a Court exercising equitable jurisdiction certainly could---In such sort of situation reliance placed on provision of S. 51 of Sales Tax Act, 1990, was inapt---Plaintiffs made out a prima facie case and balance of convenience was in their favour and against defendant authorities---If as prima facie appeared to be the case, the ultimate tax liability was zero, it would clearly be more inconvenient for plaintiffs to be impoverished, even if only temporarily, then for defendants to be enriched in like manner---Plaintiffs could well suffer irreparable loss and injury---Application for injunction was allowed in circumstances.

Administrator, Thal Development and others v. Ali Muhammad 2012 SCMR 730; Rohi Ghee Industries (Pvt.) Ltd. v. Collector of Customs and others 2007 PTD 878; Master Foam (Pvt.) Ltd. and others v. Government of Pakistan and others PLD 2005 SC 373; 2005 PTD 1537; Pakistan Beverage Ltd. Large Taxpayer Unit, Karachi 2010 PTD 2673; East and West Steamship Co. v. Collector of Customs and others PLD 1976 SC 618; Federation of Pakistan v. Jamaluddin 1996 SCMR 727; Abbasia Cooperative Bank v. Hakeem Hafiz Muhammad Ghaus PLD 1997 SC 3; Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 PTD 1392 and Benyon and Partners v. HM Commissioner of Customs and Excise (2004) UKHL 53 ref.

Khalid Jawed Khan and Muhammad Ahmer for Plaintiff (in Suit No.554 of 2014).

Kafeel Ahmed Abbasi for Defendants Nos. 1 and 2 (in Suit No.554 of 2014).

Ghulam Hyder Shaikh for Defendant No.3 and Ilyas Ahsan Departmental representative (in Suit No.554 of 2014).

Syed Iftikhar Hussain Shah and Imdad Khan for Plaintiff (in Suit No.1543 of 2013).

Sohail Muzaffar for Department (in Suit No.1543 of 2013).

Ziaul Haq Makhdoom, D.A.G. in both suits (in Suit No.1543 of 2013).

Dates of hearing: 3rd and 24th September, 2014.

2015 P T D 279

[Sindh High Court]

Before Munib Akhtar, J

Messrs PT. SYNERGY OIL NUSANTARA through Duly Constituted Attorney, Karachi

Versus

Messrs EVERGREEN MARINE CORPORATION (TAIWAN) LTD., and 5 others

Suit No.1090 and C.M.As. Nos. 9174 and 14478 of 2013, decided on 22nd April, 2014.

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

----S.138---Frustrated cargo, dealing of---Principle---Term 'frustrated cargo' is applied if either (a) goods are brought into customs-station by reason of inadvertence or misdirection; or (b) having been brought into a customs-station, the consignee is untraceable---Inadvertence or misdirection relevant for the purposes of S. 138 of Customs Act, 1969, must relate to bringing of goods into a customs-station---If inadvertence or misdirection relates to any other matter, that is not relevant for the purposes of S. 138 of Customs Act, 1969.

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

----S. 138---Customs Rules, 2001, Rr. 86, 87, 88 & 89---Suit for declaration and injunction---Frustrated cargo---Permission to re-export---Plaintiff was a foreign company and goods in question were shipped to Pakistan for onward transmission to Afghanistan under Pak-Afghan Transit Trade Treaty against bill of lading in the name of Pakistani company---Original importer backed out and there was a new importer willing to import goods to Afghanistan but Customs authorities did not permit and directed to auction the goods---Plea raised by plaintiff was that goods in question had become "frustrated cargo" and plaintiff was to be allowed to re-export them without payment of any duties and taxes etc.---Validity---Manifest error was made by authorities and actual exercise as required by law (i.e. under S. 138 of Customs Act, 1969 and Rr. 86 to 89 of Customs Rules, 2001) was not carried out---Focus remained exclusively on IGM and in effect, subsequent bills were disregarded---Relevant documents were not examined from correct statutory perspective and the exercise must be carried out in accordance with law so that a proper determination was made as to whether or not the goods could be re-exported---Such exercise could not be carried out by High Court as civil court, as it was statutory duty of Collector of Customs---High Court directed Collector of Customs to carry out such exercise, as it had already not undertaken by him---High Court further directed Collector of Customs to give a hearing to plaintiff and after taking into consideration the IGM as well as all relevant "other documents" (which must include two subsequently issued bills and documents relating to transactions regarding the goods) and to decide whether they were "frustrated cargo" within the meaning of S. 138 of Customs Act, 1969, by reason of consignee being untraceable and if he would so conclude, then goods were to be allowed to be re-exported without payment of any taxes and duties etc.---Suit was disposed of accordingly.

Sohail Muzaffar and Imtiaz Mazhar Lari for Plaintiff.

Shakeel Ahmed for Defendant No.3.

Dates of hearing: 14th February and 10th March, 2014.

2015 P T D 349

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

ZAHEER AHMED

Versus

DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-IR and 4 others

Constitutional Petition No.D-3337 of 2013, decided on 11th June, 2014.

(a) Constitution of Pakistan---

----S.203---Criminal Procedure Code (V of 1898), Ss.249-A, 265-K & 561-A---Superintendence of High Court over subordinate courts---Inherent jurisdiction of High Court---Scope---Quashing of proceedings---Principles---High Court is responsible for entire administration of justice and being charged with responsibility of supervising all Courts subordinate to it, High Court is competent to take all appropriate measures for preventing mal-administration of justice and abuse of process of law in appropriate cases---When case is of no evidence or registration of case is proved to be mala fide or case is of purely civil nature or when there is unexceptional delay in disposal of case causing deplorable mental, physical and financial torture to person proceeded against, High Court is competent to take cognizance of the matter and by exercising inherent powers under S.561-A, Cr.P.C. to correct a wrong by ordering quashing of F.I.R. and proceedings emanating therefrom---Powers vested in High Court under S. 561-A, Cr.P.C. are co-extensive with powers vested in Trial Court under Ss. 249-A & 265-K, Cr.P.C. and in appropriate cases can be invoked directly without resorting to decision by Trial Court under Ss. 249-A & 265-K, Cr.P.C. to avoid abuse of process of Court.

The State v. Asif Ali Zardari and another 1994 SCMR 798; Muhammad Khalid Mukhtar v. The State through Deputy Director, FIA (CBA), Lahore PLD 1997 SC 275; Miraj Khan v. Gul Ahmed 2000 SCMR 122; Maqbool Rehman v. The State and others 2002 SCMR 1076; Mian Munir Ahmad v. The State 1985 SCMR 257; Raees Ahmad Khan v. The State 1991 PCr.LJ 1381; Ch. Pervez Ellahi v. The Federation of Pakistan 1995 MLD 615 and Muhammad Hassan v. Manzoor Ahmad and another 1991 PCr.LJ 2177 rel.

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

----Ss.14 & 33---Federal Excise Act (VII of 2005), Ss.13 & 19---Constitution of Pakistan, Art.199---Constitutional petition---Quashing of F.I.R.---Action without jurisdiction---Petitioner was not a registered person whether under S. 13 of Federal Excise Act, 2005, or under S.14 of Sales Tax Act, 1990, nor petitioner had any history of being assessed to pay duty under Federal Excise Act, 2005---In the present case, before raid at the premises of petitioner, seizing goods and sealing premises, petitioner was neither issued with any show cause notice nor any opportunity was provided by authorities to petitioner to explain his position with regard to allegations as contained in F.I.R.---Validity---F.I.R. and proceedings emanating therefrom were without lawful authority---Authorities acted without jurisdiction and in violation of express provisions of law---High Court while exercising inherent jurisdiction vested in it and in order to avoid abuse of process of law quashed F.I.R. and proceedings pending before Trial Court since 2012 without any useful progress---Petition was allowed in circumstances.

Shah Nawaz and 2 others v. Birjlal and others 2011 MLD 956; Sadaqat Ali Khan through L.Rs. and others v. Collector Land Acquisition and others PLD 2010 SC 878; Muhammad Amin v. Master Bashir Ahmed and others 2006 SCMR 969; Shah Muhammad v. Haq Nawaz and another PLD 1970 SC 470; Muhammad Ashraf v. Faiz Ali and 11 others PLD 1975 SC 556; Abdul Razzaq v. S.H.O. and others 2008 PCr.LJ 812; Abdul Rashid and another v. The State 1983 PCr.LJ 42; Senator Asif Ali Zardari and another v. The State PLD 2008 Kar. 381; Khursheed Ahmed v. The State 2011 YLR 2368; Muhammad Aslam Baig v. The State 1993 MLD 567 and Quaid Johar v. Murtaza Ali and another PLD 2008 Kar. 342 ref.

Tariq Mehmood for Petitioner.

S. Mohsin Imam and M. Azam Nafees, I.R., A.O./I.O. for Respondent.

Asfaq Rafiq Janjua, Standing Counsel for Respondents.

Date of hearing: 11th June, 2014.

2015 P T D 401

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zafar Ahmed Rajput, JJ

COMMISSIONER INLAND REVENUE ZONE-I, REGIONAL TAX OFFICE, KARACHI

Versus

Messrs LAKHANI SECURITIES (PVT.) LTD.

I.T.R.A. No.76 of 2013, decided on 6th May, 2014.

(a) Constitution of Pakistan---

----Arts. 189 & 201---Judgments of superior Courts---Applicability---In terms of Art.201 of the Constitution, subject to Art. 189 of the Constitution, decision of High Court, to the extent it decides a question of law or is based upon or enunciates a principle of law, is binding on all Courts, subordinate to it, including Tribunals and Authorities etc. performing their functions within its territorial jurisdiction.

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

----Ss.2 & 4 [as amended by Finance Act (III of 2006) and Finance Act (I of 2008)]---Income Tax Ordinance (XLIX of 2001), Ss.2(i)(l), 133(1) & 221(1)---Workers' Welfare Fund---Charging of such fund from net profit---Grievance of authorities was that Appellate Tribunal Inland Revenue wrongly held that Workers' Welfare Fund was not chargeable in taxpayer's case on Net Profit declared for the year in view of clause 2(i)(l) of Workers' Welfare Fund Ordinance, 1971---Validity---Order passed by Commissioner (Appeals) as well as by Appellate Tribunal Inland Revenue suffered from factual and legal error and the same were set aside---Both the forums below failed to take cognizance of amendments introduced through Finance Act, 2006 and Finance Act, 2008, respectively in Ss. 2 & 4 of Workers' Welfare Funds Ordinance, 1971---High Court declined to dilate upon merits of case while exercising reference jurisdiction in terms of S. 133 (1) of Income Tax Ordinance, 2001, as the time was restricted to the extent of deciding a question of law which could arise from the order of Appellate Tribunal---High Court remanded the matter to Appellate Tribunal Inland Revenue to decide the controversy afresh after providing opportunity of hearing to both the parties keeping in view the observations made by High Court and after taking cognizance of amendments in law of Workers' Welfare Fund Ordinance, 1971, or amendments in Income Tax Ordinance, 2001---Reference was disposed of accordingly.

Commissioner of Income Tax v. Messrs Kamran Model Factory 2002 PTD 14; Messrs E.P.C.T. (Pvt.) Ltd.'s case 2011 PTD 2643; Shahbaz Garments (Pvt.) Ltd. v. Pakistan PLD 2013 Sindh 449 and Messrs Mutual Funds Association of Pakistan v. Federation of Pakistan 2010 PTD 306 ref.

Chaudhry Nazir Ahmad for Applicant.

Chief Executive Muhammad Yaseen Lakhani for Respondent.

Date of hearing: 16th April, 2014.

2015 P T D 438

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

RAZA FECTO TRACTORS (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No.D-488 of 2006, decided on 6th December, 2014.

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

----S. 32---Constitution of Pakistan, Art.199---Constitutional petition---Natural justice, principles of---Applicability---Personal hearing by the President---Scope---Petitioner was aggrieved of order passed by the President as appellate authority under Federal Tax Ombudsman Ordinance, 2000---Plea raised by petitioner was that the President did not give personal hearing to him and decide appeal---Validity---Requirement of law was not that a person was to be given personal hearing by the President in such matters while deciding representation filed by authorities in terms of S. 32 of Federal Tax Ombudsman Ordinance, 2000---Principle of natural justice i.e. 'no one shall be condemned unheard' which was to be applied in judicial, quasi-judicial and even in administrative proceedings, an opportunity of filing comments or objections before the President under S. 32 of Federal Tax Ombudsman Ordinance, 2000, would meet requirements of "sufficient opportunity"---Requirements of natural justice were not violated in matters, wherein aggrieved party was provided with an opportunity of filing its objections/comments on a representation filed under S.32 of Federal Tax Ombudsman Ordinance, 2000, in writing before the President---High Court declined to interfere in order passed by the President as the same was correct in law and did not warrant exercise of any discretionary relief and interference by High Court in Constitutional jurisdiction---Petition was dismissed in circumstances.

Federation of Pakistan through Secretary Establishment Division, Government of Pakistan v. Muhammad Tariq Pirzada 1999 SCMR 2189; Federation of Pakistan through Secretary Establishment Division, Government of Pakistan v. Muhammad Tariq Pirzada 1999 SCMR 2744; Messrs Siddiqsons Weaving Mills (Put) Limited, v. Federation of Pakistan PLD 2005 Kar. 656; Commissioner of Income Tax, Faisalabad Zone, Faisalabad and another v. Akhlaq Cloth House, Faisalabad and another 2008 PTD 965; Federation of Pakistan v. Professor Dr. Anwar and 2 others 2006 SCMR 382; Collector of Customs, Lahore v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Impartial Paints and Varnish Works v. The Federal Government and 2 others PLD 1996 Kar. 550 and SF Engineering Services v. Federation of Pakistan and 4 others PLD 2014 Sindh 378 ref.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Scope---Competent forum, order of---Constitutional jurisdiction can not be exercised against order of an authority which has otherwise been passed by competent forum having jurisdiction---High Court cannot sit in appeal to examine veracity of any such order and or material which requires factual ascertainment of allegations, as the same is beyond the scope of Art. 199 of the Constitution---Relief sought under Constitutional jurisdiction is discretionary in nature, therefore, the same cannot be exercised in matters which involve disputed facts and require further probe and investigation.

Faisal Siddiqui for Petitioners.

Dilawar Hussain, Standing Counsel for Respondents.

Date of hearing: 23rd September, 2014.

2015 P T D 462

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs ADVANCE TELECOM

Versus

FEDERATION OF PAKISTAN and 3 others

Constitutional Petition No.D-2728 of 2014, heard on 22nd September, 2014.

(a) Jurisdiction---

----Exercise of---Principle---Exercise of jurisdiction by authority is a mandatory requirement and its non-fulfilment entails entire proceedings to be coram non-judice---When statute specifically provides and vests jurisdiction in a particular Court, forum or authority, an attempt by any other Court, forum or authority to take cognizance of the matter or to initiate any proceedings would render such proceedings non-est in the eyes of law, void ab-initio and of no legal effect---All authorities performing functions under any statute must conduct themselves strictly within the domain and jurisdiction vested in them under the law and not otherwise---All such actions which have been initiated on the basis of such defective jurisdiction cannot be sustained and all subsequent actions taken purportedly on the basis of such defective jurisdiction are also liable to be declared illegal, void ab-initio as if the same were never initiated.

Mansab Ali v. Amir and 3 others PLD 1971 SC 124 rel.

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

----Ss.11-A & 48(1)---Constitution of Pakistan, Art.199---Constitutional petition---Disputed amount---Recovery from bank account---Grievance of assessee company was that authorities had issued notice of attachment of its bank account and recovered disputed amount in exercise of powers under S. 11-A of Sales Tax Act, 1990, on the plea of short payment of tax---Validity---If a registered person had filed its return and indicated any amount in that return as payable and then failed to pay said amount of tax which was due on the basis of the return itself, action under S. 11-A of Sales Tax Act, 1990, could be initiated by authorities---Assessee was disputing amount being claimed by authorities as due, as according to assessee it had already paid and discharged liability of tax due at the time of import and was not required to pay any further tax at the stage of sale and supply of goods imported by it---Return of sales tax of assessee did not disclose any amount which was due and had not been paid, hence the case of assessee did not fall within the ambit of S. 11-A of Sales Tax Act, 1990---Action taken by authorities by issuing attachment notice under S.48(1) of Sales Tax Act, 1990, and recovery of amount in question was illegal and without any lawful authority and jurisdiction---High Court directed the authorities to refund to the assessee the amount recovered unlawfully---Petition was allowed in circumstances.

Iqbal Salman Pasha for Petitioner.

Dilawar Hussain for Respondent No.1.

Jawaid Farooqui Commissioner Inland Revenue, Zone-III, RTO-III, Karachi.

M. Sarfraz Ali Metlo, Asif Jamali Deputy Commissioner Inland Revenue RTO-II, Karachi for Respondents Nos. 3 and 4.

Date of hearing: 22nd September, 2014.

2015 P T D 604

[Sindh High Court]

Before Syed Saeedudin Nasir, J

Messrs SKYWORD (PVT.) LTD. through General Manager

versus

SALAHUDDIN and 9 others

Suit No.340 and C.M.As. Nos. 3183, 3184 of 2013 13951 of 2014, decided on 20th November, 2014.

Customs Act (IV of 1969)---

----S. 131---Civil Procedure Code (V of 1908), O. XXXIX, Rr. 1 & 2---Specific Relief Act (I of 1877), Ss. 39, 42 & 54---Suit for cancellation of documents, declaration and injunction---Interim injunction, grant of---Clearance of goods for exportation---Plaintiff claimed to be the owner of goods in question which were alleged to be stolen and defendant intended to export to foreign country---Validity---Stolen property which was subject matter of FIR in question might turn out to be belonging to plaintiff and if the same was exported, it would cause irreparable loss to plaintiff's reputation by sole act of export of the same---Plaintiff had made out a prima facie case for grant of injunction and balance of convenience was also in favour of plaintiff, who was likely to suffer irreparable loss if injunction was refused---Application was allowed in circumstances.

PLD 1993 Kar. 90; PLD 1993 Kar. 262; PLD 2012 SC AJ&K page-7; 2001 YLR 327 and PLD 2004 SC 860 ref.

Khawaja Shamsul Islam along with Imran Taj for Plaintiffs.

Arjumand Khan for Defendants Nos. 4 and 5.

Amiruddin for Defendant No.8.

2015 P T D 668

[Sindh High Court]

Before Muhammad Ali Mazhar and Naimatullah Phulpoto, JJ

MUMTAZUDDIN

versus

The STATE

Special Criminal Bail Application No.40 of 2014, decided on 10th November, 2014.

Customs Act (IV of 1969)---

----Ss. 2(s), 156(1)(8) & 185-F---Prevention of Smuggling Act (XII of 1977), S. 46---Import Policy, 2013, para 5 (A) (i)---Criminal Procedure Code (V of 1898), S. 497(2)---Smuggling of arms---Bail, grant of---Negative list---Case of further inquiry---Accused was arrested for smuggling parts of weapons which were included in negative list of Import Policy, 2013---Judge of High Court as Special Appellate Court constituted under S. 185-F of Customs Act, 1969, dismissed bail application filed by accused---Office raised objection to maintainability of bail application before Division Bench of High Court---Validity---Bail application was maintainable before Division Bench of High Court against rejection order of bail passed by Special Appellate Court---Offence provided under S. 156(1)(8) of Customs Act, 1969, read with S.2(s) of the said Act, and banned items / negative list provided under Import Policy, 2013, had altogether different impact and premise---Items provided under negative list were banned for import while offence for smuggling was separate offence which had nothing to do with banned items or negative list---Offence was to be considered within the parameters of S. 156(1)(8) of Customs Act, 1969, which was directly related to offence of smuggling---Accused was booked and charged under the provisions of Customs Act, 1969, for the offence of smuggling so reference to definition of "arms or ammunition" provided under Pakistan Arms Ordinance, 1965, as given by Special Appellate Court in its order was irrelevant---Accused was entitled to concession of bail even when offence fell within the prohibitory clause of Cr.P.C., provided his case was covered within the purview of further inquiry and benefit of doubt could be extended in favour of accused even at bail stage---Evidence at bail stage could not be appreciated deeply and for the purpose of bail, law was not to be stretched in favour of prosecution---Bail was allowed in circumstances.

Muhammad Tahir's case 1991 PCr.LJ 644; Tariq Bashir's case PLD 1995 SC 34; Syed Amir Ahmed Hashmi's case PLD 2004 Kar. 617; Central Board of Revenue's case PLD 1986 SC 192; Penal Law of India Davey v. Lee (1968) 1 Q B 366; Stephen's Digest of the Criminal Law 5th Edn., (1894); Archbold Criminal Pleading, Evidence and Practice quoted; Syed Amanullah Shah's case 2013 YLR 110; Farooq Ahmed's case 2014 YLR 998; Ferozur Rahman Batla's case 1980 PCr.LJ 663; Asif Ayub's case 2010 SCMR 1735; Khalid Javed Gillani's case PLD 1978 SC 256 and Syed Lakhat-e-Hasnain's case 2010 SCMR 855 ref.

Asghar Ali and another 1999 SCMR 654 fol.

Khawaja Shams-ul-Islam and Shahzad Mehmood for Applicant.

Ashfaque Rafiq Janjua, Standing Counsel.

I.O. Siraj Panwhar, Corporate Crime Circle, F.I.A.

Date of hearing: 28th October, 2014.

2015 P T D 690

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Malik Gaddi, JJ

COMMISSIONER (LEGAL) INLAND REVENUE, KARACHI

versus

Messrs DIGRI SUGAR MILLS LTD., I.T.R.A. No.309 of 2010, decided on 8th May, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S. 133(1)---Reference---Jurisdiction of High Court---Factual dispute---Scope---Authorities were aggrieved of decision made by Appellate Tribunal Inland Revenue and preferred reference to High Court---Questions framed in reference did not contain any question of law---Effect---No error or illegality existed in order passed by Appellate Tribunal Inland Revenue---No substantial question of law had arisen from the order of Tribunal which required any interference by High Court---Reference jurisdiction under S. 133(1) of Income Tax Ordinance, 2001, was limited to the extent of examining questions of law which could arise from the order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Muhammad Altaf Mun for Applicant.

Nemo for Respondent.

Date of hearing: 8th May, 2014.

2015 P T D 702

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

MUHAMMAD MEASUM and others

versus

FEDERATION OF PAKISTAN through Secretary and others

Constitutional Petitions Nos. D-3830, D-3629, D-3630, D-3950 and D-3693 of 2014, decided on 22nd November, 2014.

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

----S.4---Notification S.R.O. 670(I)/2013, dated 18-7-2013---Constitution of Pakistan, Art.199---Constitutional petition---Zero rating facility---Applicability---Grievance of petitioners was that Provisional Certificate issued to them was cancelled on the ground that they did not have in-house facility for manufacturing, therefore, they were not entitled for zero rating facility---Validity---Provisions mentioned in Provisional Certificate could not be invoked retrospectively, except in case of some wilful mis-declaration or concealment of material facts at relevant time of seeking such benefit or if documents furnished in such regard were found to be forged and that too after confronting manufacturer-cum-importer through notice after providing an opportunity to explain his position---Provisions of notification S.R.O. 670(I)/2013, dated 18-7-2013, itself did not provide for any retrospective cancellation of Provisional Certificate, merely on allegation that manufacturer-cum-importer did not have manufacturing facility, whereas exemption certificate was issued only after physical verification and complete fulfilment of all codal formalities---Provisional Certificate was issued in terms of notification S.R.O. 670(I)/2013, dated 18-7-2013 and any condition attached or stipulated in Provisional Certificate could not go beyond the mandate of the S.R.O. itself---Commissioner Inland Revenue did not have any power to give retrospective effect to cancellation of a certificate already issued and on the basis of which some vested rights had accrued to petitioners who had already imported raw material and claimed to have consumed the same in manufacturing of goods---Commissioner Inland Revenue was required in law to issue mandatory notice, prior to taking any such adverse action against petitioners---No retrospective effect could be given to any such cancellation letter and such letter by authorities was issued without any show-cause notice or affording opportunity of being heard, therefore, the same was not sustainable in law and was set aside---Petition was allowed accordingly.

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

---S. 4---Notification S.R.O. 670(I)/2013, dated 18-7-2013---Criminal Procedure Code (V of 1898), S. 561-A---Constitution of Pakistan, Art.199---Constitutional petition---Quashing of FIR---Inherent jurisdiction of High Court---Zero rating facility---Customs authorities got FIR registered against petitioners alleging that they did not have in-house facility for manufacturing, therefore, they were not entitled for zero rating facility---Validity---Conditions attached to notification S.R.O. 670(I)/2013, dated 18-7-2013, made it clear that entire mechanism and manner provided either for grant of exemption/zero rating or recovery of sales tax in case of any alleged violation was entrusted to concerned Commissioner Inland Revenue having jurisdiction in the matter and not with Customs authorities---Registration of FIR which entailed penal/criminal consequences was not based on proper appreciation of law as well as conditions stipulated in Notification S.R.O. 670(I)/2013, dated 18-7-2013---Customs authorities acted without any lawful authority and jurisdiction while registering FIR wherein different sections and penal clauses of Sales Tax Act, 1990, and Income Tax Ordinance, 2001, had been incorporated---Once it was established that an Authority acted without jurisdiction and in excess of lawful authority, the aggrieved person was well within its right to seek quashment/annulment of FIR and proceedings, from High Court by invoking its Constitutional jurisdiction---Directing petitioners to approach Trial Court for remedy, would only prolong agony of petitioners which could amount to abuse of process of law and justice---High Court while exercising inherent jurisdiction under S. 561-A, Cr.P.C. and Art. 199 of the Constitution, quashed FIR and proceedings emanating therefrom---Petition was allowed accordingly.

Miraj Khan v. Gul Ahmed and 3 others 2000 SCMR 122; Maqbool Rehman v. The State and others 2002 SCMR 1076; Khurram Farooq Siddiqui v. Department of Customs and Excise, Collectorate of Customs (Export) and another 2009 PTD 992; Messrs Lucky Cement Ltd. v. Federation of Pakistan and others Constitutional Petition No.D-216 of 2013; Zaheer Ahmed v. Directorate General of Intelligence and Investigation-IR and others Constitutional Petition No.3337 of 2013; Messrs Yasir Enterprises through Ch. Bsher Ahmed v. Federation of Pakistan through Secretary and 7 others 2013 PTD 821; Babar Younus v. The State PTCL 2007 CL 71; Ch.Pervez Ellahi v. The Federation of Pakistan 1995 MLD 615 rel.

Zain A. Jatoi along with Azhar Nawab Rizvi for Petitioner (in Constitutional Petition No.3950 of 2014).

Dilawar Hussain Standing Counsel for Respondent No.1.

M. Khalil Dogar for Respondent No.3 (in Constitutional Petition No.D-3830 of 2014).

Kashif Nazeer for Respondent No.4 (in Constitutional Petition No.D-3830 of 2014).

Ashiq Ali Anwar Rana for Respondent No.2 (in Constitutional Petition No.D-3950 of 2014).

Iqbal Khurram for Respondent No.3 (in Constitutional Petition No.D-3693 of 2014).

Samad holding brief and M. Sarfraz Ali Metlo for Respondents Nos. 2 to 4 (in Constitutional Petitions Nos.D-3629 and D-3630 of 2014).

Mrs. Masoods Siraj for Respondents Nos. 3 and 4 (in Constitutional Petition No.D-3950 of 2014)

Khalid Mahmood Dhoon for Respondent No.2 (in Constitutional Petition No.D-3693 of 2014).

Date of hearing: 23rd September, 2014.

2015 P T D 761

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

BELAL MOSTAFA SADEQI LTD. through Special Attorney

versus

DEPUTY COLLECTOR OF CUSTOMS and 4 others

Constitutional Petition No.D-361 of 2014, heard on 12th September, 2014.

Customs Act (IV of 1969)---

----S. 45(2)---Constitution of Pakistan, Art. 199---Constitutional petition---Import manifest, amendment of---Purpose and scope---Obvious error---Effect---Petitioner had imported a consignment and he being consignee of goods had possession of House Bill of Lading---Material contents with regard to weight, description and number of packages of consignment were identical on the Bills of Lading---Master Bill of Lading had also been issued with regard to the same goods for which petitioner had possession of the House of Bill of Lading---Both Bills of Lading were with regard to the same shipment with identical particulars except the name of shipper and consignee---Request for change of information in the manifest of Vessel was not done by the customs authorities showing the name of the Freight Forwarder as consignee of the goods due to mistake on the part of said Freight Forwarder---Appropriate officer of customs authorities should permit the person-in-charge of a conveyance or his authorized agent to correct any obvious error in the import manifest or to supply any omission which had resulted from accident or inadvertence by furnishing an amendment or supplementary import manifest upon payment of prescribed fee---Amendment in the import manifest could be requested by the Shipping Agent with regard to an obvious error or for supplying any addition in the same by filing of a supplementary manifest---Intention and purpose of S. 45(2) of Customs Act, 1969 was not to restrict but to facilitate the trade with correction of errors and mistake---Present matter was of an obvious error or a genuine mistake---Freight Forwarder who had been shown as consignee of the goods in the import manifest before the customs authorities was not owner of the goods---Amendment requested on behalf of the petitioner was covered under the provision of S. 45(2) of Customs Act, 1969 as due to obvious error the name of Freight Forwarder of the consignment had been shown as consignee of import manifest of Vessel instead of the petitioner---Constitutional petition was allowed in circumstances.

Yazdani Engineering Industry v. Appellate Tribunal and another 2009 PTD 2213 ref.

AVIA International and others v. Assistant Collector of Customs (Import), Appraisement Collectorate, Customs House, Karachi and others 2004 PTD 997 rel.

Sardar Faisal Zafar for Petitioner.

Kashif Nazeer for Respondents Nos. 1 and 2.

Ghulam Rasool Khattak for Respondent No.3.

Date of hearing: 12th September, 2014.

2015 P T D 809

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE SUKKUR

versus

JAVED AHMED SHAIKH MIAN BAZAR, NASIRABAD LARKANA and another

Special S.T.R.A. No.592 of 2011, decided on 21st May, 2014.

Sales Tax Act (VII of 1990)---

----S.47(1)---Reference to High Court---New plea, raising of---Questions formulated by authorities were not raised before Appellate Tribunal Inland Revenue---Effect---Question which was neither raised nor argued by authorities or decided by Appellate Tribunal Inland Revenue could not be treated as a question of law arising out of the order of the Tribunal---Questions proposed through reference application did not arise from order passed by Appellate Tribunal Inland Revenue---Reference was dismissed in circumstances.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 and Messrs Japan Storage Battery Ltd., v. Commissioner of Income Tax, Companies Zone-I, Karachi 2003 PTD 2849 rel.

S. Mohsin Imam for Applicant.

Nemo for Respondent.

Date of hearing: 21st May, 2014.

2015 P T D 877

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

HASCOL PETROLEUM LTD.

versus

FEDERATION OF PAKISTAN and another

Constitutional Petition No.D-4385 of 2014, decided on 5th September, 2014.

Customs Act (IV of 1969)---

----Ss. 168 & 169---Constitution of Pakistan, Art. 199---Constitutional petition---Prevention of smuggling; powers of search, seizure and arrest---Seizure of goods liable to confiscation---Import of motor gasoline (pyrolysis gasoline)---Petitioner impugned the notice of detention of its imported cargo (motor gasoline/pyrolysis gasoline) along with vessel by Customs Officials---Contention of the petitioner was inter alia that no valid ground for detention of its goods and vessel was given in the detention notice issued by Customs Officials under S.168 of the Customs Act, 1969, and furthermore, there was no concept of seizure of vessel contemplated under S. 168 of the Customs Act 1969---Validity---Customs Officials, before the High Court, conceded that while they acted in good faith, however, perhaps they had acted prematurely as goods declaration had not been filed by the petitioner; and stated that they would withdraw the impugned detention notice and release imported motor gasoline (pyrolysis gasoline) and vessel of the petitioner, and that the petitioners may be directed to file the goods declaration which would be processed in accordance with law---High Court directed that the matter be disposed of in such terms by consent of the parties and Customs Officials were not to cause harassment to the petitioner while processing the goods declaration---Constitutional petition was disposed of, accordingly.

Mst. Ummatullah v. Province of Sindh PLD 2010 Kar. 236; Government of Sindh v. Messrs Khan Ginners (Private) Limited PLD 2011 SC 347; Trustees of the Port of Karachi v. Messrs N. K. Enterprises PLD 2013 Sindh 264; Salahuddin Dharaj v. Province of Sindh PLD 2013 Sindh 236; Tehsil Municipal Administration and others v. Noman Azam and others 2009 SCMR 1070 and Collector of Customs and others v. S.M. Yousuf 1973 SCMR 411 rel.

Omair Nisar for Petitioner.

Kashif Nazeer for Respondents.

Dilawar Hussain, Standing Counsel.

Jahanzaib Abbasi, Assistant Collector of Customs Preventive and Atif Aijaz, Appraising Officer, Oil Section, Keamari.

2015 P T D 902

[Sindh High Court]

Before Sajjad Ali Shah and Shaukat Ali Memon, JJ

Messrs SONERI INTERNATIONAL

versus

COLLECTOR OF CUSTOM

Special Customs Reference Application No.21 of 2011 and C.M.A No.144 of 2012, decided on 27th November, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 32, 32-A, 36, 156, 194-B, 195, 196 & 215---Determination of customs value---Mis-declaration---Acceptance of corrigendum of show-cause notice---Special Customs Reference---Importer imported two consignments, which were got cleared allegedly at very low value as compared to identical/similar goods imported from same destination by the other importers---Show-cause notice issued to the importer culminated into passing of order-in-original, whereby offence of misdeclaration of value, was found established---Appeal against order-in-original, was rejected, by Appellate Tribunal---Applicant contended that Appellate Tribunal, was not justified in accepting the corrigendum issued after about 2 months from issuance of show-cause notice; that Appellate Tribunal was not justified by holding that past and closed transaction could be re-opened after two years of final assessment; that though quantity of the goods imported by the applicant was different, but Appellate Tribunal held that quantity of identical goods was same which had resulted into substantial miscarriage of justice and that there was no mis-declaration for evasion of duty and taxes, which was correctly declared; and was determined by the concerned Duty Officer---Validity---Held, that no loss had been caused to the applicant, since impugned order had been passed within ambit of show-cause notice; applicant had the knowledge of the proposed action and Appellate Tribunal was justified in acceptance of the corrigendum; Appellate Tribunal had compared the vires of Ss.32 & 195 of Customs Act, 1969, and found that both were independent to each other; having different schemes and time limit, as such Customs Authorities were quite competent to reopen the case; sufficient documentary proof was made available before the Tribunal with regard to declaration of value of goods, non-raising of the objection at the stage of assessment of goods, the ground realities had not changed decision---Intentional less value declaration of the imported goods, and getting it cleared, amounted to evasion of duties and taxes, despite no charge of misdeclaration was levelled in the show-cause notice; when same was established by comparing the value of the similar goods declared by the other importers at the relevant time; there was no substance in the Reference, which was dismissed in circumstances.

Darvesh K. Mandhan for Applicant.

2015 P T D 925

[Sindh High Court]

Before Nadeem Akhtar and Muhammad Iqbal Kalhoro, JJ

ADDITIONAL COLLECTOR

versus

Messrs SILVER CORPORATION

Special Sales Tax Application No.82 of 2003, decided on 21st January, 2015.

Sales Tax Act (VII of 1990)---

----Ss. 36,34, 33 & 47---Recovery of tax not levied or short-levied or erroneously refunded---Additional tax and penalties---Taxpayer was served with show-cause notice under S. 36 of the Sales Tax Act, 1990 for fraudulently obtaining refund on basis of bogus and invalid sales tax invoices and after the proceedings an amount was held to be recoverable from the taxpayer along with additional penalty under Ss.36, 33 & 34 of the Sales Tax Act, 1990---Said findings of the order-in-original were reversed by the Appellate Tribunal on the ground that action against taxpayer could have been taken only under S. 45A of the Sales Tax Act, 1990---Validity---Held, that Appellate Tribunal while reversing findings of the order-in-original had lent itself on the import inherent in S. 45A of the Sales Tax Act, 1990 which catered to an entirely different situation---Impugned order was silent with regard to applicability of S. 36 of the Sales Tax Act, 1990 which in view of the subject matter of the show-cause notice was the most relevant issue to be adjudicated upon---Show-cause notice was issued to the taxpayer within the stipulated period of five years as provided in S. 36 of the Sales Tax Act, 1990 and the Appellate Tribunal had not adverted to such factual position while deciding the appeal of the taxpayer against the order-in-original---Impugned order also did not reflect upon S. 33 of the Sales Tax Act, 1990 which came into play in the event of violation of provisions of the Sales Tax Act, 1990 and which had been specifically referred to in the show-cause notice and deliberated upon by the Appellate Tribunal---Impugned order of Appellate Tribunal therefore could not be sustained and was set aside---Matter was remanded to the Appellate Tribunal for decision afresh on merits in accordance with law---Appeal was allowed, accordingly.

Abdul Mujeeb Pirzada for Appellant.

None for Respondent.

Date of hearing: 26th November, 2014.

2015 P T D 948

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs DOCKS PRIVATE LIMITED through Authorize Manager

versus

FEDERATION OF PAKISTAN through Chairman and 3 others

Constitutional Petition No.D-4471 of 2014, decided on 23rd December, 2014.

Customs Agents Licensing Rules, 2001---

----Rr.102(4) & 340---Constitution of Pakistan, Art.199---Constitutional petition---Suspension of license---Non-issuance of show-cause notice---F.I.R., registration of---Petitioner was licensed Bonded Carrier and Clearing Agent, whose license was suspended by authorities on the basis of FIR registered against him---Validity---Licensing Authority was required under law to pass a reasoned order of suspension independently after recording its own reasons---Licensing Authority, in addition, was required under law to immediately initiate process of taking further action, which included issuance of proper show cause notice to the person, whose license had been suspended, as an immediate measure in terms of R. 102(4) of Customs Agents Licensing Rules, 2001---Intention behind R. 102 (4) of Customs Agents Licensing Rules, 2001, was not merely to allow suspension of license as an immediate measure and then have it suspended without issuance of a proper show cause notice within a reasonable time, as otherwise, it would defeat the principles of natural justice---Such power of immediate suspension had to be exercised with utmost care and due diligence---Continuous suspension of license of petitioner merely on the ground that F.I.R. had been registered against petitioner as well as the importer by Directorate of Intelligence and Investigation, Federal Board of Revenue, was not warranted in law and could be justified without any further proceedings in the matter in accordance with law---High Court set aside the order passed by authorities suspending license of petitioner---Petition was allowed in circumstances.

Messrs Pak. Afghan Cargo Service (Pvt.) Ltd., through Director v. Deputy Collector of Customs and 5 others 2014 PTD 661 rel.

Khawaja Shams-ul-Islam and Hassan Sabir for Petitioners.

Dilawar Hussain for Respondent No.1.

Muhammad Sarfaraz Ali Metlo for Respondents Nos. 2 and 4.

Kashif Nazeer for Respondent No.3.

Muhammad Ilyas Ahsan, Appraising Officer, Customs Department.

Date of hearing: 23rd December, 2014.

2015 P T D 963

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

COLLECTOR OF CUSTOMS, through Additional Collector of Customs

versus

Messrs EASTERN CONSTRUCTION COMPANY

Special Customs Reference Applications Nos.88 to 102 of 2014, decided on 22nd December, 2014.

Customs Act (IV of 1969)---

----Ss. 194-A, 194-C, 196 & 181---Import Policy Order, 2013, Paras.9(ii)(5) & 10(vii), PCT Heading 8705-4000---Reference to High Court---Department being aggrieved and dissatisfied by the order passed by the Customs Appellate Tribunal, had filed reference application before High Court---Applicant/department, pressed two questions; (a) whether Bench of the Appellate Tribunal, without Member (Technical) possessed jurisdiction to decide/dispose of an appeal; (b) whether, Chairman of the Appellate Tribunal, erred in law to hold that the impugned vehicle, was classifiable under PCT Heading 8705-4000, meant for "specialized vehicles"---Contention of department was that Member (Judicial) Customs Appellate Tribunal, had erred in law and facts, while passing the impugned order in the absence of Member (Technical) Customs Appellate Tribunal, which authority was not vested in the Single Member (Judicial) in terms of S.194-C of the Customs Act, 1969; that Customs Appellate Tribunal had erred while holding that impugned vehicles were classifiable under PCT Heading 8705-4000 meant for "Specialized Vehicles" and that it was a case of mis-declaration by the importer, whereby importer while ignoring and by violating the terms of Import Policy Order, 2013 attempted to import old and used truck classifiable under PCT Heading 8704-2219, in the garb of old and used concrete transit mixer truck in connivance with pre-shipment company---Validity---No findings, had been recorded by Customs Appellate Tribunal on the question of constitution of Bench as neither such ground was raised by the applicant/department in the appeal, nor it appeared to have been argued on behalf of the department before the Customs Appellate Tribunal---Subsection (4) of S.194-C of Customs Act, 1969, provided that Chairman or any other Member of Customs Appellate Tribunal, authorized in that behalf by the Chairman, could while sitting singly, dispose of any case which could be allotted to the Bench of which he was a member; where the value of goods confiscated without option having been given to the owner of the goods to pay a fine in lieu of confiscation under S.181 of Customs Act, 1969; and in any disputed case the difference in duty and taxes involved or duty or tax involved, or the amount of fine or penalty involved, did not exceed five million rupees---In the present case, the appeal had been decided by the Chairman himself while sitting singly; whereas the value of goods confiscated, without option having been given to the owner of the goods to pay a fine in lieu of confiscation; and the difference in duty or tax involved in the case, did not exceed rupees five million---Chairman, Customs Appellate Tribunal, while sitting singly, had the authority to dispose of any case himself, if conditions as provided under clauses (a) & (c) of subsection (4) of S.194-C of the Customs Act, 1969, were applicable; whereas such conditions were attracted in the present case---Impugned order, in circumstances, had not been passed without jurisdiction by the Chairman (Judicial Member) Customs Appellate Tribunal, while sitting singly---Question as proposed by the department in that regard was answered by the High Court in the affirmative against the department and in favour of the importer---No error or perversity in the findings of fact as recorded by the Customs Appellate Tribunal was noticed in the impugned order which otherwise depicted correct legal position---Import of the vehicle in question had been made by the importer after complying with legal requirements---Status and physical specification of vehicles in question, had duly been confirmed by the Ministry of Commerce, which had to regulate the import and export of the goods; and applicant department, could not draw any adverse inference in that regard---Customs Authorities without any factual, or legal basis, had disallowed the release of the vehicles in question, merely on the presumption that, importer would not use the imported concrete Transit Mixer for mixing and transportation of liquid cement; and could subsequently use such vehicles as normal loading trucks for transportation of other goods by removing the welded, adopted and fabricated Concrete Transit mixer---Customs Authorities, under the law were required to conduct examination, process the Goods Declaration, and to make assessment of the consignment imported "as presented" on the basis of import presentation of Goods Declaration examination and assessment; and not on assumption or suspicion that subsequent to clearance of such consignment, the goods could be used for some other purpose by altering and changing its structure, particularly when so such eventuality had surfaced---Such authority, if allowed to be exercised by the Customs Authorities, would result in multiplicity of unnecessary litigation; and was likely to defeat the purpose, and implementation of import Policy---Nothing had been brought on record, either to show that any of the terms and conditions of Para 9(ii)(5) of the Import Policy Order, 2013 had been violated by the importer, nor it was the case of the department that importer did not require such vehicles for the purpose as defined in the said Para of the Import Policy Order, 2013---Question on the subject was answered by the High Court in the negative, against the department and in favour of importer---Decision of the Customs Appellate Tribunal, in that regard was pre-dominantly based on fact, which depicted correct legal position---No exception could be drawn by High Court, while exercising Reference jurisdiction under S.196 of the Customs Act, 1969.

Collector of Customs (Appraisement) v. Messrs Shabaz International 2007 PTD 202; Collector of Customs through Additional Collector of Customs, Karachi v. Messrs Qasim International Container Terminal (Pak) Ltd. 2013 PTD 392; Messrs Real Trading Co. through Wali Muhammad, Karachi 2010 PTD 826; Abu Bakar Siddique v. Collector of Customs and others 2002 CLC 1066; Messrs Gold Trade Impex through partner and another v. Appellate Tribunal of Customs, Excise and Sales Tax through Collector of Customs, and 2 others 2012 PTD 377; Collector of Customs, Karachi v. Messrs Ali Enterprises, Karachi 2006 PTD 651; Collector of Customs, Model Customs Collectorate of PACCS, Karachi v. Muzammil Ahmed 2009 PTD 266; Collectorate of Customs v. Messrs Noman Chugtai 2007 PTD 153; Sherzada v. Collector Customs, Peshawar 2011 PTD 301 and Collector of Customs, Port Muhammad Bin Qasim, Karachi 2008 SCMR 1538 ref.

Kashif Nazeer for Applicant.

Malik Nadeem Iqbal and Malik Altaf Javed for Respondents.

Date of hearing: 27th August, 2014.

2015 P T D 995

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

COMMISSIONER INLAND REVENUE, KARACHI

versus

Messrs EASTERN CARGO CENTRE

I.T.R.A. No.377 of 2010, decided on 19th August, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S.131(1)---Reference---Maintainability---Question of law---Scope---Income Tax Authorities were aggrieved of order passed by Appellate Tribunal Inland Revenue whereby order passed by Collector Income Tax was maintained---Validity---Question which was neither raised, discussed, argued or decided by Appellate Tribunal, could not be termed as question of law arising from order of Appellate Tribunal, which required any opinion of High Court---One of the proposed questions did not arise from order passed by Appellate Tribunal whereas second question was otherwise not pressed by authorities---Question raised by authorities was not a substantial legal question and did not require any opinion of High Court under its reference jurisdiction in terms of S. 131(1) of Income Tax Ordinance, 2001---Reference was dismissed in circumstances.

Noble (Pvt.) Ltd., Karachi v. Federal Board of Revenue through Chairman and others 2009 PTD 84 ref.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 and Messrs Japan Storage Battery Ltd. v. Commissioner of Income Tax, Companies Zone-I, Karachi 2003 PTD 2849 rel.

Jawaid Farooqui for Applicant.

Ubedullah Abro for Respondent.

Date of hearing: 19th August, 2014.

2015 P T D 1276

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Aqeel Ahmed Abbasi, JJ

ADDITIONAL COLLECTOR OF CUSTOMS

versus

K.S. SULEMANJI ESMAILJI AND SONS (PVT.) LTD.

Special Custom Reference Applications Nos. 8 to 33 of 2011, decided on 22nd December, 2014.

Customs Act (IV of 1969)---

----Ss. 33, 194-A & 196---H.S. Codes 3920-2020 & 3920-2040---Refund claim---Reference to High Court---Importer, who had imported 26 consignments, claimed assessment under H.S. Codes 3920-2020 & 3920-2040, chargeable to statutory rate of customs duty at 25%---All consignments imported by the importer, were allowed, and released on the basis of such declaration; as importer at the relevant time was enjoying the facility of "ACP" (Automatic Clearance Procedure), without scrutiny of the documents, and examination of the goods---Importer after clearance of the goods, filed application for refund of customs duty in terms of S.33 of the Customs Act, 1969, on the ground that the goods imported by him, were appropriately classifiable under H.S. Code 3920-2030 chargeable to statutory rate of Customs Duty at 20%, as against H.S. Code 3920-2020 & 3920-2040 on which the importer had paid statutory rate of customs duty at 25%---Adjudicating Authority, rejected the claim of refund filed by the importer, vide order-in-original, against which the importer filed appeal and Appellate Authority, having dismissed appeal, importer filed further appeal before Customs Appellate Tribunal, who vide common order set aside orders passed by the forums below, and allowed the appeals of the importer---Validity---Appellate Tribunal had dealt with the factual aspects, as well as merits of the case, and had arrived at a definite findings of facts, which could not be questioned or agitated any further in the present Reference application of the department---Impugned order passed by the Customs Appellate Tribunal, being based on correct appraisal of facts and proper application of law, no exception could be drawn in that regard---Reference application, was dismissed, in circumstances.

Messrs Fecto Belarus's case PLD 2005 SC 605; Abdul Ghaffar Bhundi through attorney v. Federation of Pakistan 2008 PTD 1475; Messrs A-One Feeds through Managing Partner v. Deputy Collector, Adjudicating-I Karachi and others 2008 PTD 1029; Collector of Customs, Custom House, Lahore v. S. M Ahmed and Company (Pvt.) Limited, Islamabad, 1999 SCMR 138; Messrs Gold Trade Impex v. Appellate Tribunal of Customs, Excise and Sales Tax 2012 PTD 377; Japan Storage Battery Limited v. Commissioner of Income Tax 2003 PTD 2849 and Collector of Customs v. Messrs Qasim International Container Terminal (Pak) Ltd., 2013 PTD 392 ref.

Kashif Nazir along with Ilyas Ahsan, Appraising Officer, Customs Department for Applicant.

Parvez Iqbal Kasi for Respondent.

Date of hearing: 9th December, 2014.

2015 P T D 1308

[Sindh High Court]

Before Nazar Akbar, J

NAWAB BROTHERS STEEL MILLS (PVT.) LTD. and others

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance

Suit Nos.83 and 84 of 2015, decided on 27th January, 2015.

Customs Act (IV of 1969)---

----Ss.18(3), 30, 79, 104 & 131---Specific Relief Act (I of 1877), Ss.42 & 54---Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2---Notification S.R.O. 18(I)/2015, dated 14-1-2015---Suit for declaration and injunction---Interim injunction, grant of---Rate of duty---Determination---Principle---Plaintiffs imported goods from foreign supplier under contract executed prior to issuance of Notification S.R.O. 18(I)/2015, dated 14-1-2015---Plea raised by plaintiffs was that authorities be restrained from applying/deducting regulatory duty in terms of notification S.R.O. 18(I)/2015, dated 14-1-2015---Validity---Manner and method of date of determination of rate of duty on goods imported into Pakistan were subject to Ss.79 & 104 of Customs Act, 1969, and date of determination of rate of duty on goods exported was subject to provisions of S.131 of Customs Act, 1969---Imposition and collection of regulatory duty on "import" and "export" was different and distinct and no analogy could be drawn for interpreting the provision of one section of the statute with the other section in the same statute by referring to case-law dealing with one particular levy---Provisions of notification S.R.O. 18(I)/2015, dated 14-1-2015, were applicable on shipments of plaintiffs in terms of S.30 of Customs Act, 1969, irrespective of the fact that plaintiffs had entered into contract for purchase of consignments with foreign suppliers and opened letter of credits prior to 14-1-2015---High Court declined to grant interim injunction against applicability of notification S.R.O. 18(I)/2015, dated 14-1-2015---Suit was dismissed in circumstances.

Messrs Amtex Ltd. v. Customs Excise and Sales Tax Appellate Tribunal and 4 others 2011 PTD 602 and Saifuddin v. Federation of Pakistan through Secretary Revenue Division, Ministry of Finance, Islamabad and 2 others 2011 PTD 2760 distinguished.

Government of Pakistan and others v. Muhammad Ashraf and others PLD 1993 SC 176; Molasses Trading and Export Co. (Pvt.) Limited and others v. Government of Pakistan and others 2007 PTD 1005; Government of Pakistan v. Messrs Pesticide Air Services Ltd, and others PLD 1993 SC 132; Qaiser Brother (Pvt.) Limited v. Government of Pakistan and others PLD 1991 SC 884; Collector of Customs v. Ravi Spinning Ltd. 1999 SCMR 412 and Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917 ref.

Nemo for Plaintiff No.1.

Haider Waheed for Plaintiff No.2.

Nemo for Defendant No.1.

Kashif Nazeer for Defendants Nos. 2 and 3.

Iqbal Khurram for Defendants.

Dates of hearing: 21st and 23rd January, 2015.

2015 P T D 1340

[Sindh High Court]

Before Munib Akhtar, J

AUGERE PAKISTAN (PVT.) LTD. through Authorized Attorney

versus

PROVINCE OF SINDH through Secretary Ministry of Finance and 4 others

C.M.A. No.7215 of 2013 in Suit No.767 of 2013, decided on 20th January, 2015.

Sindh Sales Tax on Services Act (XII of 2011)---

----S. 2(97)---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---Telecommunication services---Plaintiff assailed demand of tax raised by Revenue authorities for use of poles, masts and towers claiming such services to be "telecommunication services," as defined under S. 2(97) of Sindh Sales Tax on Services Act, 2011---Validity---Pole, tower or mast that was being used commonly was being 'shared' between plaintiff and (relevant) defendant---Pole, tower and mast could be regarded as having certain 'capacity' even in plaintiff's own case, since it had a physical dimension and there was only so much equipment (booster, transmitter, antenna etc.) that could be fixed on to or hung from it especially when height requirements were also taken into account---Such capacity was not within the meaning of definition and third element in the definition made it clear---Capacity was in relation, or with reference to transmission, emission or reception of signals---License had granted the service provider, the right to use such capacity and if such capacity was shared with another then a 'telecommunication service' was provided within the meaning of S.2(97) of Sindh Sales Tax on Services Act, 2011---Plaintiff made out a prima facie case as proposed levy fell outside the scope of 'telecommunication service' and other ingredients for interim relief also lay in favour of plaintiff---Business of plaintiff would be adversely affected, if it was unable to have access to various towers, poles etc. as per its arrangements with private defendants (companies) and such access might become practically unavailable if the tax was levied and plaintiff would suffer irreparable loss and injury---Balance of convenience also lay in favour of plaintiff, therefore, case for interim relief was made out---High Court suspended notice issued by revenue authorities and restrained them from charging, claiming or collecting any tax under Sindh Sales Tax on Services Act, 2011, in respect of any matter that would come within the scope of sharing passive infrastructure---Application was allowed accordingly.

Ali Almani and Sarmad Hani for Plaintiff.

Sarfaraz Ali Metlo for Defendant No.2.

Salahuddin Ahmed and Nadeem Ahmed for Defendant No.3.

Muhammad Ehsan for Defendant No.4.

Dates of hearing 27th August and 9th September, 2014.

2015 P T D 1417

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs AHSAN BROTHERS

versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 3 others

Constitutional Petition No.D-4900 of 2014, decided on 15th January, 2015.

Customs Act (IV of 1969)---

----Ss. 194-A & 194-C---Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006---Constitution of Pakistan, Art.199---Constitutional petition---Petitioner had impugned the order passed by the Chairman, Customs Appellate Tribunal, whereby order passed by a Division Bench of the Customs Appellate Tribunal, comprising Member (Judicial-I) and Member (Technical-II), had been set aside and office of the Tribunal had been directed to fix the appeal for re-hearing before the current Bench---Chairman, Customs Appellate Tribunal, under S.194-C of the Customs Act, 1969, had the authority to constitute various benches, consisting of single member, or two or more, technical or judicial members for hearing appeals---Provision of S.194-C of the Customs Act, 1969 did not authorise the Chairman, Customs Appellate Tribunal to transfer the case from one Bench to another Bench wherein hearing had been concluded; and the matter had been reserved for judgment/order---Chairman, Customs Appellate Tribunal had no authority to interfere in whatsoever manner, with the judgment/order already signed and announced by a Bench of the Customs Appellate Tribunal as had been done through the impugned order---Chairman Customs Appellate Tribunal, had no authority, either under the Customs Act, 1969, or the Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006, to interfere, modify, or alter the judgment/order passed by a Bench having jurisdiction over the case at the time of hearing of appeal, when it was reserved for judgment/order---Impugned order passed by the Chairman, Customs Appellate Tribunal, was without jurisdiction, and had been passed without lawful authority, which was set aside---No re-hearing of the case was required---Office was directed to issue true copy of the order to the concerned party in accordance with law and rules, in circumstances.

Mian Abdul Ghaffar for Petitioner.

Dilawar Hussain, Standing Counsel for Respondent No.1.

Ghulam Haider Shaikh and Kashif Nazeer along with Zubair Ahmed, Assistant Registrar, Customs Appellate Tribunal and M. Ilyas Ahsan, Appraisal Officer, Customs Deptt. for Respondents Nos. 2 to 4.

Date of hearing: 15th January, 2015.

2015 P T D 1428

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs CHAWLA RUBBER AND PLASTIC INDUSTRIES (PVT.) LTD. and others

versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL and 2 others

Special Custom Reference Applications Nos. 315, 316 and 317 of 2011 decided on 4th February, 2015.

Customs Act (IV of 1969)---

----S. 196---Notification SRO 509(I)/2007, dated 9-6-2007 [as amended by Notification SRO 471(I)/2009, dated 14-6-2009]--- Reference to High Court--- Zero rating--- Applicability--- 'Tyre CORD Fabric' was imported and sales tax was exempted by giving benefit of "zero rating" in terms of notification SRO 509(I)/2007, dated 9-6-2007--- Authorities issued show-cause notice to importer on the ground that it was not entitled to exemption of "zero rating"--- Validity--- Held, at the relevant time i.e. upto 13-6-2009, before amendment in notification S.R.O. 509(I)/2007, dated 9-6-2007 through notification SRO 471(I)/2009, dated 14-6-2009, whereby goods in dispute i.e. 'Tyre CORD Fabric' had been specifically excluded, was entitled to exemption/zero rating of sales tax, as the same was fully covered by description "Textiles and Articles thereof" as mentioned in column No.2 of the Table to Notification S.R.O. 509(I)/2007, dated 9-6-2007, and the corresponding entry in PCT headings in column No.3 of that Table--- Finding as recorded by Customs Appellate Tribunal in such regard was erroneous and contrary to material available on record and also based on incorrect interpretation of law and the relevant SRO on the subject--- High Court answered question in negative in favour of importers and against authorities--- Reference was allowed in circumstances.

Messrs Filters Pakistan (Pvt.) Limited v. Federal Board of Revenue through Member Customs and 2 others 2010 PTD 2036 rel.

Central Insurance Company and others v. The Central Board of Revenue and others 1993 SCMR 1232 ref.

Saadat Yar Khan for Applicants.

Dilawar Hussain for Respondent No.1.

Khalid Mehmood Dhoon for Respondent No.2.

S. Mohsin Imam Wasti and Ilyas Ahsan Appraising Officer Legal for Respondent No.3.

Date of hearing: 16th September, 2014.

2015 P T D 1532

[Sindh High Court]

Before Munib Akhtar, J

SHAZEB PHARMACEUTICAL INDUSTRIES LTD. through Sultan Mehmood

versus

FEDERATION OF PAKISTAN through Chairman, Finance Division, Islamabad and 4 others

Suits Nos.843, 907, 941 and 942 of 2014, decided on 2nd February, 2015.

(a) Interpretation of statutes---

----Word 'and'---Conjunctive or disjunctive---Determination---Starting point must be to read 'and' conjunctively and if it leads to a sensible and reasonable meaning, then that is to be preferred over reading the word disjunctively.

(b) Interpretation of statutes---

----Fiscal statute---Exemption---Scope---If taxpayer fairly comes within the scope of exemption, then he cannot be denied the same on the basis of any supposed intention of law maker or authority empowered to grant exemption.

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

----S. 3---Notification SRO 551(I)/2008, dated 11-6-2008---Specific Relief Act (I of 1877), Ss. 42 & 54---Suit for declaration and injunction---Sales tax, recovery of---Pharmaceutical product---Determination---Plaintiffs were pharmaceutical companies and claimed that intravenous infusion manufactured with low density polyethylene of pharmaceutical grade was a pharmaceutical product for the purposes of sales tax exemption under notification SRO 551(I)/2008, dated 11-6-2008---Validity---If notification in question was intended to limit term 'pharmaceutical products' only to those as given in chapter 30 of Import Tariff, then Federal Government could easily had done so, in line with the approach adopted in Sixth Schedule and also had followed in other notifications, however, such had not be done---Term 'pharmaceutical products' could not be limited only to Chapter 30 of Import Tariff, on the basis of any supposed intention of Federal Government---If plaintiffs fairly came within the scope of the notification they would be entitled to the benefit of exemption---Even in relation to Import Tariff itself, while the rules of interpretation were given as a 'preamble' to the same, it was also specifically provided that in case of any classification dispute, decision of Board would be final which it had already given in favour of plaintiffs, many years ago---High Court decided both the issues in favour of plaintiffs and against defendants---Suit was decreed in circumstances.

Collector of Customs v. Shakeel Ahmed 2011 PTD 495; Collector of Customs Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Amin Textile Mills (Pvt.) Ltd. v. Commissioner of Income Tax and others 2000 SCMR 201; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Shadman Cotton Mills Ltd. v. Federation of Pakistan and another 2009 PTD 193; Binaco Traders v. Federation of Pakistan and others 2006 PTD 1491; Malik Muhammad Saeed v. Federation of Pakistan and others 2006 PTD 2167 and Dewan Scrap (Pvt.) Ltd. and another v. Customs Central Excise and Sales Tax Appellate Tribunal and others 2003 PTD 2127 ref.

Zaheerul Hassan Minhas and Obaidullah for Plaintiff (in Suits Nos. 843, 941 and 942 of 2014).

Mayhar Kazi for Plaintiff (in Suit No.907 of 2014).

Ms. Masooda Siraj for Defendants Nos. 3, 4 and 5 (in Suit No.843 of 2014).

Sarfraz Ali Metlo for Defendant No.3 (in Suits Nos. 907 of 2014, 941 of 2014 and 942 of 2014).

Ms. Afsheen Aman for Defendant No.4 (in Suit No.941 of 2014).

Muhammad Aslam Butt, D.A.G. for the State.

Date of hearing: 31st October, 2014.

2015 P T D 1555

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Syed Saeeduddin Nasir, JJ

Messrs SAFE LIFE (PVT.) LTD. through Managing Director

Versus

FEDERATION OF PAKISTAN through Secretary/Chairman and 4 others

Constitutional Petition No.D-1388 of 2015, decided on 18th March, 2015.

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

----Ss. 32 & 33---Constitution of Pakistan, Art. 199---Constitutional jurisdiction of High Court---Alternate remedy---Effect---Constitutional petition in presence of alternate remedy under S. 34 of the Federal Excise Act, 2005---Maintainability---Petitioner / taxpayer impugned recovery notices under the Federal Excise Act, 2005, after the petitioner's appeal under S. 33 of the Federal Excise Act, 2005 against the same, was dismissed---Held, that petitioner had availed remedy provided under the Federal Excise Act, 2005 by filing an appeal before the Commissioner (Appeals) whereafter an order had been passed on merits; and if the petitioner felt aggrieved of the said order, he should have availed remedy provided under S. 34 of the Federal Excise Act, 2005 by filing an appeal before the Appellate Tribunal---High Court under Art. 199 of the Constitution did not exercise appellate jurisdiction; jurisdiction of High Court under Art. 199 of the Constitution was an extraordinary jurisdiction which could be invoked sparingly in cases where some jurisdictional error or patent illegality had been pointed out by an aggrieved person and no adequate alternate remedy was available for redressal of such a grievance---Impugned order in the present case was passed by the Commissioner (Appeals) while exercising lawful jurisdiction under the Federal Excise Act, 2005 and such order could be challenged by the petitioner by filing an appeal before the Appellate Tribunal under S. 34 of the Federal Excise Act, 2005---High Court observed that present petition was not maintainable, however, the petitioner was at liberty to approach the relevant forum as provided under the Federal Excise Act, 2005---Constitutional petition was dismissed, in circumstances.

Chairman, Central Board of Revenue and others v. Pak-Saudi Fertilizer Ltd. 2000 PTD 3748 distinguished.

Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881; Messrs Maritime Agencies (Pvt.) Ltd., v. Assistant Commissioner of S.R.B. and others 2015 PTD 160 and Messrs Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090 rel.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Alternate Remedy---Scope----High Court under Art. 199 of the Constitution did not exercise any appellate jurisdiction and jurisdiction of High Court under Art. 199 of the Constitution was an extraordinary jurisdiction which could be invoked sparingly in cases where some jurisdictional error or patent illegality had been pointed out by an aggrieved person and no adequate alternate remedy was available for redressal of such a grievance.

Mushtaque Hussain Qazi for Petitioner.

Date of hearing: 17th March, 2015.

2015 P T D 1580

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs FOTILE KITCHEN AND HOME APPLIANCES and others

versus

FEDERATION OF PAKISTAN and others

C.Ps. Nos. D-1904, D-2597, D-1561, D-138, D-798 and D-2777 of 2014, decided on 13th November, 2014.

Customs Act (IV of 1969)---

----Ss.25, 25-A, 25-D & 194-A---Constitution of Pakistan, Art. 199---Constitutional petition---Valuation rulings---Alternate and efficacious remedy---Plea raised by authorities was that importers had also availed alternate remedy as provided under S. 25-D of Customs Act, 1969, therefore, petition was not maintainable---Validity---Where any party resorted to statutory remedy against order, then the same could not be abandoned or bypassed, without any valid and reasonable cause by filling Constitutional petition, challenging same action---Importers failed to satisfy that there was any valid or reasonable cause available with them to abandon or bypass proceedings before Revisional / Appellate authorities and to file Constitutional petition before High Court---Petition filed by importers was misconceived and not maintainable in law as alternate and efficacious remedy was available to importers which had already been availed by them---Importers concealed material facts from High Court and had further availed departmental remedy by filing appeals before Customs Appellate Tribunal without leave of the High Court---Petition was dismissed in circumstances.

Goodwill Traders, Karachi v. Federation of Pakistan and others 2014 PTD 176 and Sadia Jabbar and 3 others v. Federation of Pakistan and others 2012 SCMR 617 rel.

Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty and others PLD 1961 SC 119; The Murree Brewery Co. Ltd v. Pakistan and 2 others PLD 1970 Lah. 821; Mst. Sattan and others v. Group Captain Masroor Hussain PLD 1962 (W.P.) Lah. 151; Capt. Siraj Ali v. Director General and another 1989 CLC 1026; Premier Cloth Mills Ltd. Lyallpur v. The Sales Tax Officers, Investigation and another 1972 SCMR 257; Husein Sugar Mills Ltd., v. The Islamic Republic of Pakistan and another (1979) 7 BTD 90; Fazal Elahi v. Chairman, Evacuee Trust Property Board and another 1987 CLC 1010; Messrs Amin Textile Mills (Pvt.) Ltd., v. Commissioner of Income Tax and 2 others 2000 SCMR 201; Tawakkal General Export Corporation and another v. The Collector of Customs (Export) Karachi and 2 others PLD 1992 Kar. 199; Mehboob Ali Sani v. Additional District Judge and others 1991 SCMR 1880; Pakistan Metal Industries v. Assistant Collector, Central Excise and Land Customs and another 1990 CLC 1022; Town Committee, Gakhar Mandi v. Authority under the payment of Wages Act, Gujranwala and 57 others PLD 2002 SC 452; Ch. Abdul Humid v. Deputy Commissioner and others 1985 SCMR 359; Mst. Zahida Begum v. Wing Commander Ziauddin Ahmed and 5 others 1983 CLC 187; Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Messrs Faco Trading through Proprietor v. Member Customs Federal Board of Revenue and others, Messrs Kamran Industries v. The Collector of Customs (Exports and 4 others PLD 1996 Kar. 68; Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) Karachi PLD 1992 SC 847; The Commissioner of Income Tax Karachi and 2 others v. Messrs N.V. Philips Gloeilampenfabriaken PLD 1993 SC 434; Messrs Pak-Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Arshad Hussain v. Collector of Customs and 2 others 2010 PTD 104; Messrs Bilal International v. Federation of Pakistan and others 2014 PTD 465; Bulk Shipping and Trading (Pvt.) Limited v. Collector of Customs 2004 PTD 679 and Pakistan Exploration BP and Production Inc. Karachi v. Additional Commissioner Inland Revenue 2011 PTD 647 ref.

Ghulamullah for Petitioners.

Dilawar Hussain, Ghulam Haider Shaikh, M. Sarfaraz Ali Metlo, Iqbal M. Khurram, Mrs. Masooda Siraj and Ms. Dil Khurram Shaheen for Respondents.

Date of hearing: 13th November, 2014.

2015 P T D 1607

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs M. YASIN & CO.

versus

FEDERATION OF PAKISTAN and others

C.P. No. D-4898 of 2014, decided on 17th January, 2015.

Import Policy Order, 2013---

----Para 9 (ii)(5)---Constitution of Pakistan, Art. 199---Constitutional petition---Post clearance use---Concrete mixer, import of---Petitioners imported old and used concrete transit mixture trucks as construction machinery, which were importable in terms of para 9 (ii)(5) of Import Policy Order, 2013, on fulfillment of certain conditions---Customs authorities withheld clearance of trucks in question on the ground that after clearance the same would be used as transport vehicle / trucks---Validity---Merely on presumption it could not be said at the stage of clearance that imported concrete mixers would not be used for such purposes and rather would be used as truck for transportation of goods---Law did not restrict any such usage and such apprehension was repelled---Petition was allowed in circumstances.

Messrs Baig Enterprises and Engineering and another v. Federation of Pakistan and others 2015 PTD 181 fol.

Mian Abdul Ghaffar for Petitioner.

Dilawar Hussain, Standing Counsel for Respondent No.1.

Ms. Masooda Siraj along with Ilyas Ahsan for Respondents Nos. 2 to 4.

Date of hearing: 15th January, 2015.

2015 P T D 1749

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

ASHRAF FORWARDING AGENTS

versus

FEDERATION OF PAKISTAN and others

C.P. No.D-449 of 2014, decided on 15th January, 2015.

Customs Rules, 2001---

----R. 102---Constitution of Pakistan, Art. 199---Constitutional petition---Import of goods---Suspension of license of clearing agent---Petitioner, who was a clearing agent, impugned the letter issued by Customs Authorities whereby the license of the petitioner was suspended on the ground that certain importers who were being represented by the petitioner had defaulted in payment of duty and taxes---Held, that procedure to be adopted while initiating proceedings against defaulting license holders appeared to have not been adopted by the Customs Authorities in the present case---High Court with consent of parties; disposed of the petition with direction to Customs Authorities to confront the petitioner with the violations, if any, committed by the petitioner to the provisions of Customs Act, 1969, the Customs Rules, 2001 or to the terms and conditions of the license, where after appropriate action may be taken after providing an opportunity of being heard to the petitioner---Impugned letter / order was set aside and the Authorities were directed to restore license of the petitioner with the observation that the Customs Authorities would be at liberty to take appropriate actions against the petitioner strictly in accordance with law and after providing an opportunity of hearing to the petitioner---Constitutional petition was disposed of, accordingly.

Aqeel Ahmed for Petitioner.

Dilawar Hussain, Standing Counsel for Respondent No.1.

Ms. Afsheen Aman and Ilyas Ahsan Law Officer Legal for Respondent No.3.

Date of hearing :15th January, 2015.

2015 P T D 1799

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

WATER AND POWER DEVELOPMENT AUTHORITY (WADPA) through Chief Resident Representative

versus

FEDERATION OF PAKISTAN, MINISTRY OF FINANCE, through Secretary Finance and 2 others

Constitutional Petition No.D-160 of 2012, decided on 20th May, 2014.

Customs Act (IV of 1969)---

----S.33---Constitution of Pakistan, Art.199---Constitutional petition---Refund of claim---Pending proceedings---Grievance of petitioner was that despite decision of Customs, Excise and Sales Tax Appellate Tribunal in its favour, authorities had not paid its refund claims---Validity---Appellate proceedings, in fact, were continuity of original proceedings and unless matter was fully decided by the highest forum provided under the statute, implementation of order, which had been assailed before higher forum in accordance with law, could not be sought by filing a Constitutional petition under Art. 199 of the Constitution, as the same could render remedy of appeal / revision before higher forum as illusionary and would amount to frustrate such proceedings---Relief sought by petitioner seeking implementation / execution of order of Customs, Excise and Sales Tax Appellate Tribunal, which otherwise had merged into the order passed by High Court, was still pending for final adjudication before Supreme Court---Grievance of petitioner was misconceived and was also premature and could not be granted by High Court under Art. 199 of the Constitution, at such stage---Claim of refund had not been finally determined by authorities in accordingly with law---Petition was dismissed in circumstances.

Badar Alam for Petitioner.

Sarfaraz Ali Metlo for Respondents.

Date of hearing: 20th May, 2014.

2015 P T D 1863

[Sindh High Court]

Before Faisal Arab, C.J. and Zafar Ahmed Rajput, J

HABIB SAFE DEPOSIT VAULT (PVT.) LTD.

versus

PROVINCE OF SINDH through Secretary, Ministry of Revenue and 2 others

C.P. No.D-2063 of 2015, decided on 22nd May, 2015.

Sindh Sales Tax on Services Act (XII of 2011)---

----S. 3---Companies Ordinance (XLVII of 1984), S. 40(3)---Constitution of Pakistan, Art. 199---Constitutional petition---Sales tax on services---Change of name---Petitioner company was engaged in business of providing safe deposit locker services and was aggrieved of notice from authorities requiring to register itself and pay sales tax on its revenue income under Sindh Sales Tax on Services Act, 2011---Validity---Change in name did not change rights and obligations of a company---If petitioner had continued with its old name, it would have been made liable to pay sales tax---Mere change of label did not change character of petitioner as banking company as even with change in name, petitioner continued to retain its original status and could be made liable to pay sales tax on its services---Petitioner was part of a banking company and was liable to pay sales tax on its services under Sindh Sales Tax on Services Act, 2011---Petition was dismissed in circumstances.

Messrs Lucky Cement Factory Limited and others v. The Government of N.-W.F.P. 2013 SCMR 1511 and City Bank NA v. Commissioner Inland Revenue 2014 PTD 284 ref.

Agha Faisal for Petitioner.

Khalid Zamir, Dy. Commissioner, Legal, Sindh Revenue Board along with Syed Zainul Abdin for Respondents Nos. 2 and 3.

Date of hearing: 5th May, 2015.

2015 P T D 2072

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs PAKISTAN TELECOMMUNICATION COMPANY LTD. through duly Authorized Attorney and others

versus

PROVINCE OF SINDH through Secretary, Ministry of Finance and 2 others

Constitution Petitions Nos. D-4326 of 2012 and D-3035, 4090, 4091, 4118 and 4119 of 2014, decided on 11th March, 2015.

(a) Sindh Sales Tax on Services Act (XII of 2011)---

----S. 10---Constitution of Pakistan, Art.199---Constitutional petition---Levy of sales tax on services---Telecommunication services---International incoming calls---Withdrawal of exemption---Show-cause notice, issuance of---Petitioner company was providing telecommunication services and had shown its inability to pay sales tax on services being provided for international incoming calls on the pretext that there were some restrictions with regard to charging any tax from foreign telecommunication agencies and passing on such incident of sales tax to its customers---Plea raised by petitioner was that levy of such sales tax and its collection from petitioner by authorities would be unreasonable and in conflict with telecommunication laws of the country as well as international telecommunication regulations etc.---Validity---Prima facie there was no error or illegality on the part of authorities while issuing notifications in question which were issued in lawful exercise of jurisdiction as vested under S.10 of Sindh Sales Tax on Services Act, 2011---No allegation of bias or mala fide existed in exercise of discretion by government while issuing notifications in question, whereby exemption earlier granted on revenue received on international incoming calls had been withdrawn---No ground was found for interference under Art. 199 of the Constitution as petitioners were merely confronted through show-cause notice by authorities regarding effect of withdrawal of exemption notifications in respect of sales tax on services by petitioner on incoming international calls, terminating in Pakistan---Constitutional Petition was premature and filed without any cause of action and in absence of any adverse order against petitioner, it was not maintainable---Petition was dismissed in circumstances.

Case-law Ref.

(b) Sindh Sales Tax on Services Act (XII of 2011)---

----Ss. 10 & 23---Constitution of Pakistan, Art.199---Constitutional petition---Levy of sales tax on services---Telecommunication services---Withdrawal of exemption---Alternate remedy---Factual controversy---Petitioner company was providing telecommunication services and assailed notification imposing sales tax on services being provided for international incoming calls---Validity---Seriously disputed facts were agitated by parties, whose scrutiny could not be undertaken by High Court while exercising Constitutional jurisdiction under Art. 199 of the Constitution---Such facts could be agitated and decided by statutory forums provided under Sindh Sales Tax on Services Act, 2011---No party could be allowed to either abandon or bypass such forums and authorities which had been assigned function of assessment of sales tax under the statute and to determine tax liability of a person---Petition was dismissed in circumstances.

Hyder Ali Khan and Sami-ur-Rehman for Petitioners (in C.P. No.D-4326 of 2012).

Ijaz Ahmed Shirazi for the Petitioners (in C.P. No.D-3035 of 2014).

Taimur Mirza for Petitioners (in C.Ps. Nos.D-4090, 4118 and 4119 of 2014).

Faisal Siddiqui and Muhammad Vawda for Respondents Nos. 2 and 3 along with Zamir Khalid, Zain-ul-Abdin, Deputy Commissioners and Atifuddin, Consultant, S.R.B.

Saifullah, A.A.-G.

Dilawar Hussain, Standing Counsel.

Date of hearing: 14th November, 2014.

2015 P T D 2168

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Hasan Feroz, JJ

Messrs PAKISTAN PETROLEUM LTD. through Deputy Chief Commercial

versus

ADDITIONAL COMMISSIONER INLAND REVENUE and 2 others

C.P. No.D-1821 and M.A. No.8018 of 2015, decided on 21st April, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A) & 122(1)---Constitution of Pakistan Art. 199---Constitutional jurisdiction of High Court---Scope---Show-cause notice for further amendment in assessment---Petitioner impugned show-cause notice issued to it under S. 122(5A) of the income Tax Ordinance, 2001 for further amendment of assessment, contending inter alia that assessment of petitioner had already been amended and further amendment amounted to change of opinion which was not permissible under law---Held, that prima facie it appeared that the impugned notice did not suffer from any jurisdictional error, patent illegality or mala fide on part of the Department---Petitioner had been provided with an opportunity which had already been availed by the petitioner in submitting response to the show-cause notice---High Court declined to record any finding or observation on the propriety and merits of the impugned notices as the same might prejudice the case of the petitioner or the Department---No legal issue which had already been subject matter of earlier proceedings against the petitioner under S. 122(1) or 122(5A) of the Income Tax Ordinance, 2001 had been re-agitated, therefore allegation of change of opinion on part of Department stood falsified---High Court observed that tendency to abandon or bypass departmental hierarchy of forums provided under the Income Tax Ordinance, 2001 was to be deprecated---Constitutional petition was dismissed, in circumstances.

Roche Pakistan Ltd., case 2001 PTD 3090; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Sitara Chemical Ltd.'s case 2003 PTD 1285 and ICI Pakistan v. Federation of Pakistan's case 2006 PTD 778 rel.

Anwar Kashif Mumtaz for Petitioner.

Muhammad Sarfaraz Ali Metlo for Respondents.

Dr. Farrukh Ahmed Ansari, Commissioner IR, LTU, Karachi, Zulfiqar Ali Memon, Additional Commissioner Zone IIILJUI, Karachi and Sharjeel Ahmed, Deputy Commissioner, IR, LTU, Karachi.

Dilawar Hussain, Standing Counsel.

2015 P T D 2275

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Syed Saeeduddin Nasir, JJ

COMMISSIONER (LEGAL) INLAND REVENUE, LARGE TAXPAYER UNIT

Versus

Messrs SHIELD CORPORATION LTD.

I.T.R.A. No. 250 of 2010, decided on 9th March, 2015.

Income Tax Ordinance (XLIX of 2001)--

---S.133---Sales Tax Act (VII of 1990), S. 47---Customs Act (IV of 1969), S. 196---General Clauses Act (X of 1897), S. 24-A-Reference to High Court---New plea---Question of law, non framing of---Speaking orders---Authorities were aggrieved of finding of Appellate Tribunal and raised new pleas which were not raised before forums below---Validity---No question of law had arisen from the order passed by Appellate Tribunal, whereas questions proposed were questions of fact---While hearing reference application either under S. 47 of Sales Tax Act, 1990, or under S. 133 of Income Tax Ordinance, 2001, and under S. 196 of Customs Act, 1969, High Court could not exercise powers of appellate or revisional court or a Constitutional court---High Court had limited powers to examine and submit response only to substantial question of law which could arise from order passed by Appellate Tribunal---Question which was neither raised nor there had been any finding recorded by Appellate Tribunal, could not be raised for the first time before High Court in Reference particularly a question which involved scrutiny of disputed facts---High Court declined to interfere in order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Commissioner of Income Tax v. Electronic Industries Ltd. Karachi 1988 PTD 111 and E.M. Oil Mills and Industries Ltd. v. Commissioner of Income Tax, Audit Division H, Companies III, Karachi 2011 PTD 2708 rel.

Jawaid Farooqui for Applicant.

Ms Lubna Pervez for Respondent.

Date of hearing: 9th March, 2015.

2015 P T D 2287

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Hassan Feroze, JJ

COMMISSIONER INLAND REVENUE, ZONE-II REGIONAL TAX OFFICE-II

Versus

Messrs SONY TRADERS WINE SHOP

Spl. S.T.R.A. No.122 of 2015, decided on 23rd April, 2015.

Sales Tax Act (VII of 1990)---

----S. 47---Income Tax Ordinance, (XLIX of 2001), S.133---Customs Act (IV of 1969), S. 196---Reference to High Court---New Question of fact---Authorities were aggrieved of finding of Appellate Tribunal and raised new pleas which were not raised before forums below--- Validity--- While hearing reference application either under S.47 of Sales Tax Act, 1990, or under S. 133 of Income Tax Ordinance, 2001, and under S. 196 of Customs Act, 1969, High Court could not exercise powers of appellate or revisional court or a Constitutional court---High Court had limited powers to examine and submit response only to substantial question of law which could arise from order passed by Appellate Tribunal---Question which was neither raised nor there had been any finding recorded by Appellate Tribunal, such question could not be raised for the first time before High Court in Reference---Order passed by Appellate Tribunal did not suffer from any factual or legal error, whereas decision was based on finding of fact, which did not suffer from any error or perversity and depicted correct legal position---High Court declined to interfere in order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Commissioner of Income Tax v. Electronic Industries Ltd. Karachi 1988 PTD 111 and E.M. Oil Mills and Industries Ltd. v. Commissioner of Income Tax, Audit Division II, Companies III, Karachi 2011 PTD 2708 rel.

Pervaiz A. Shams Memon for Applicant.

2015 P T D 2321

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs QADIR FABRICS through Managing Partner

Versus

FEDERATION OF PAKISTAN through Secretary and 3 others

C. Ps. Nos.D-5270 and D-5272 of 2013, decided on 6th February, 2015.

Sales Tax Act (VII of 1990)---

---Ss. 2(37) & 11---Criminal Procedure Code (V of 1898), S.497---Constitution of Pakistan, Art. 199---Constitutional petition---Sales tax fraud---Grant of bail---Depositing of post-dated cheques in court---Petitioners were alleged to be involved in a sales tax fraud, and were accordingly challaned in the Court of Special Judge Customs and Taxation---Petitioners applied for post-arrest bail by submitting post­dated cheques before the court --Contention of petitioners that cheques were obtained forcibly by the tax authorities with the help of the court; that recovery of (sales) tax could not be made in such manlier, in absence of mandatory notice for payment or adjudged short payment under the mandate of S. 11 of the Sales Tax Act, 1990--- Validity--­ Perusal of Annexures, through which the cheques were submitted before the court for obtaining post-arrest bail, showed that the cheques were apparently submitted voluntarily as no objection or reservation with regard to them being furnished without prejudice, had been endorsed or mentioned on the said annexures of the petitioners---Since bail had been obtained by the petitioners after furnishing post-dated cheques on their own, the objection being raised through present Constitutional petition appeared to be misconceived and was without any justification---Petitioners had not sought any declaration regarding legality or otherwise of the bail granting order, wherein, the petitioners deposited the cheques in favour of tax authorities---Moreover, the dispute regarding liability of the petitioners towards sales tax etc. was to be determined and decided by the forums provided under the relevant statute, where all such objections may be raised, which may be decided on their own merits---Constitutional petition was dismissed accordingly.

Muhammad Afzal Awan for Petitioner.

Abdul Aziz Buriro for Respondents.

Date of hearing: 6th February, 2015.

2015 P T D 2432

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Syed Saeeduddin Nasir, JJ

Messrs FAROOQ CHEMICAL CO. (PVT.) LTD. Through Director and another

Versus

COLLECTOR OF CUSTOMS and 2 others

C.P. No.D-2939 of 2010 and Special Customs Reference Application No.22 of 2012, decided on 12th August, 2015.

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

----S.156(1)---Customs Rules, 2001, Rr. 103(1) & 102(1)---Punishment for offences---Licensing authority proceeding under Customs Rules did not enjoy any power or jurisdiction to invoke penal clauses of S.156(1) of Customs Act, 1969---Customs Rules, 2001 do not confer any power upon Licensing Authority or authorized it to revoke license, either conditionally or by imposing a specific penalty without making any reference to violation of any specific Rule or S.156(1) of Customs Act, 1969.

(b) Customs Rules, 2001--

----Rr.95(2) & 103(2)---License, condition of---Appeal---No provision existed in Customs Rules, 2001, with regard to imposition of any penalty on licensee for alleged violation of any Rule---Licensing Authority at the most, by an order in writing could either suspend or revoke the license of licensee for alleged violation of R. 103 of Customs Rules, 2001 after issuing a show-cause notice and affording an opportunity of being heard to the licensee---Licensing Authority could either suspend or revoke the license under R.103(2) of Customs Rules, 2001 and upon such revocation, Licensing Authority could also order for forfeiture of security deposited by licensee under R.95(2) of Customs Rules, 2001 as pre-condition of issuance of license---Such forfeiture was in addition to any such penalty that licensee be found liable under Customs Act, 1969 or any other law for the time being in force.

(c) Customs Rules, 2001---

----R. 104---Customs Act (IV of 1969), Preamble---Penal Code (XLV of 1860), Preamble--- Repayment of security deposit---Conviction by a court of law---Effect---According to R.104 of Customs Rules, 2001 if a licensee was convicted by a court of law for any offence punishable under Customs Act, 1969 or for an offence involving moral turpitude or misappropriation of property or breach of trust under Penal Code, 1860 then license of such licensee should be revoked---By plain reading of said rule, it could be said that no action could be taken against a licensee in respect of an offence alleged to have been committed by him under Customs Act, 1969 unless he was convicted by a court of law, therefore, action taken by department merely upon registration of FIR against importer was unlawful and not warranted under law.

Messrs Khatri Brother v. Federation of Pakistan 2014 PTD 966 rel.

Syed Baqar Ali Naqvi for Petitioners (in C.P. No.D-2939 of 2010).

Haroon Khan holding brief Ghulam Haider Shaikh and Ilyas Ahsan, Appraising Officer, Customs for Respondents (in C. P. No.D-2939 of 2010).

Date of hearing: 23rd July, 2015.

2015 P T D 2447

[Sindh High Court]

Before Sajjad Ali Shah and Syed Saeeduddin Nasir, JJ

Messrs HAIDER INDUSTRIES through Sole Proprietor and 7 others

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 3 others

Constitution Petitions Nos.D-344, 369, 529 to 531, 562, 633, 873, 1181 to 1185, 1494, 1577, 1581, 1582, 1583, 1729, 1730, 1753, 1877, 1953, 1990, 1994, 2135, 2338, 2387, 2414, 2438, 2442, 2697, 2758, 2759, 2760, 2862, 2875, 2881, 2972, 2973, 3001, 3206, 3226, 3282, 3321, 3368, 3412, 3497, 3533, 3541, 3652, 3686, 3751, 3843, 3882, 3933, 3982, 4014 to 4016, 4032, 4071, 4072, 4087, 4187, 4217, 4218, 4273, 4274, 4288, 4289, 4304, 4332, 4370, 4371, 4377 to 4381, 4393, 4394, 4402, 4419, 4425, 4426, 4510, 4521, 4541, 4542, 4558, 4559, 4561 to 4566, 4583, 4605, 4637, 4661, 4673, 4674, 4678, 4705, 4711, 4736, 4737, 4767 to 4770, 4773, 4774, 4816, 4842, 4854, 4855, 4890 and 4928 of 2015, decided on 28th August, 2015.

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

----S.1"8(3)---Regulatory duty---Import of goods----Imposition of regulatory duty, notification for---Discrimination---When impugned notification applied without discrimination to all importers of the goods of the same category across the board, it could not be said that the same was discriminatory.

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

----S.18(3)---Regulatory duty---Import of goods---Imposition of regulatory duty on imported goods to promote local industry of the same products---Policy issue within the domain of the Executive---High Court declined to delve into the merits of the exercise of power by the Executive to impose such regulatory duty.

Collector of Customs v. Flying Kraft 1999 SCMR 709; Pak Ocean v. Government of Pakistan 2002 PTD 2850 and Ajay Hasia v. Khalid Mujib Sehravardi AIR 1981 SC 487 distinguished.

(c) Customs Act (IV of 1969)-

----S. 18(5), proviso---S.R.O.18(I)/2015 dated 14th January, 2015-- General Agreement on Tariffs and Trade (GATT), Arts. XXIV, XXIX, clauses 5 & 7 & Preamble---Free Trade Agreement executed between Pakistan and China dated 24-11-2006, Arts. 7, 8 & Preamble---Constitution of Pakistan, Art. 199---Constitutional petition---Regulatory duty, imposition of---Legality---Bilateral Trade Agreements---Not protected under proviso to S. 18(5) of Customs Act, 1969---Petitioners who were importers of Cellular Mobile Phone and various iron and steel products impugned S.R.O. No.18(1) of 2015 ("Impugned Notification") whereby a regulatory duty had been imposed on Cellular Mobile Phone and various iron and steel products---Contention of petitioners that the proviso to S. 18(5) of the Customs Act, 1969 stipulated that the total cumulative incidence of customs duty leviable under Ss. 18(1), (3) & (5) of the said Act could not exceed the duty which had been agreed between the Government of Pakistan under multilateral trade agreements; that the Free Trade Agreement in question was an offshoot of the General Agreement on Trades and Tariffs ("GATT") which was a multilateral agreement and Pakistan and China were both signatories thereto, therefore, imposition of impugned regulatory duty would be in violation of GATT and proviso to S.18(5) of the Customs Act, 1969---Validity---Free Trade Agreement executed between Pakistan and China on 24-11-2006 was a bilateral trade agreement and not a multilateral trade agreement---Proviso to S.18(5) of the Customs Act, 1969, allowed protection to multilateral trade agreements only---Bilateral agreements or even bilateral agreements entered on the basis of or pursuant to or consistent with terms of multilateral agreements were not protected under proviso to S.18(5) of the Customs Act, 1969---Free Trade Agreement in question, which was a bilateral agreement, was therefore not protected under proviso to S.18(5) of the Customs Act, 1969---Imposition of the regulatory duty in the present was held to be legal---Constitutional petition was dismissed accordingly with the observation that Pakistan's obligations under the bilateral Free Trade Agreement with China could not be enforced domestically unless such bilateral agreement was incorporated into the domestic law through appropriate legislation by extending it the benefit of S. 18(5) of the Customs Act 1969, as was extended to the multilateral agreements.

Societe Generale De Surveillance S.A. v. Pakistan through Secretary Ministry of Finance Revenue Division, Islamabad 2002 SCMR 1694 and Messrs Indus Rags v. Government of Pakistan 2012 PTD 1293 ref.

Messrs Asim Wire Nut Bolt Industry v. Federation of Pakistan W.P. No.6559 of 2015 disagreed with.

Haider Waheed, Mrs. Navin Merchant, Imran Iqbal Khan, Ahmed Ali Hussain, Ayyaz Shoukat, Iqbal Salman Pasha, Saleem Ghulam Hussain, Ghulam Nabi Sher, Zain A. Jatoi, Ghulamullah. Aqeel Ahmed Khan and Muhammad Afzal Awan for Petitioners.

Zia-ul-Haq Makhdoom, Deputy Attorney-General Model Customs Collectorate.

Kashif Nazeer, Ali Waheed Khan, Deputy Collector and Ilyas Ahsan Khan for Respondents.

Dates of hearing: 7th and 8th May and 20th August, 2015.

2015 P T D 2467

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs CASTROL PAKISTAN (PVT.) LTD. through Accountant

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE and others

C.Ps. Nos.D-23 and D-24 of 2015, decided on 12th February, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S.122---Constitution of Pakistan, Art.199---Constitutional petition---Amended assessment order---Show cause notice, assailing of---Principle---Assessee was aggrieved of amended assessment orders passed by authorities---Validity---Assessee challenged issuance of show cause notice as well as assessment orders, directly before High Court, under Art. 199 of the Constitution, either without exhausting statutory remedies available under law or even after filing of statutory appeals before appellate forums, merely on the ground that assessing officer had either wrongly applied law or had failed to appreciate true spirit of law while invoking such provisions, without there being any objection with regard to assessing officers' jurisdictional authority or error in such notices or orders---High Court depreciated and disapproved such tendency in tax payers, as on the one hand law had not provided for any such challenge of order directly under Constitutional jurisdiction before High Court, except when such order on the face of it was without any lawful authority or jurisdiction and secondly, it amounted to bypassing departmental authorities without any justification or cause merely for sake of convenience or for early disposal of the matter---Petitioner did not have any cause of action which could require indulgence from High Court---Petitioner itself chosen to seek and avail alternate remedy as provided under law by filing appeals against amended assessment orders, which were to be decided strictly in accordance with law---Petition was dismissed in circumstances.

Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) KHI PLD 1992 SC 847; Arshad Hussain v. Collector of Customs and 2 others 2010 PTD 104; Messrs Pak Saudi Fertilizers Ltd., v. Federation, of Pakistan 2002 PTD 679; Bulk Shipping and Trading (Pvt.) Limited v. Collector of Customs 2004 PTD 509 and BP Pakistan Exploration and Production Inc. Karachi v. Additional Commissioner Inland Revenue 2011 PTD 647 rel.

Naveed A. Andrabi for Petitioner.

Sarfraz Ali Matlo for Respondents.

Dilawar Hussain, Standing Counsel

Date of hearing: 12th February, 2015.

2015 P T D 2510

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs BUTT MACHINERY STORE through Proprietor

Versus

ASSISTANT COLLECTOR OF CUSTOMS

Special Custom Reference Application No.92 of 2012, decided on 29th January, 2015.

Customs Act (IV of 1969)---

----S.196---Income Tax Ordinance (XLIX of 2001), S.133---Sales Tax Act (VII of 1990), S. 47---Federal Excise Act (VII of 2005), S.34-A---Reference to High Court---Scope---Appellate Tribunal, finding of fact by---Principle---Importer was aggrieved of judgment passed by Appellate Tribunal, whereby order passed by Appellate authority was set aside---Validity---Finding of fact recorded by Appellate Tribunal provided under taxing statutes such as Income Tax Ordinance, 2001, Customs Act, 1969 and Sales Tax Act, 1990, could not be disputed unless the same was found to be perverse or patently illegal---High Court, while exercising its authority under jurisdiction in terms of S.196 of Customs Act, 1969, S. 133 of Income Tax Ordinance, 2001, S.47 of Sales Tax Act, 1990, or S. 34-A of Federal Excise Act, 2005, could not ignore if decision of Appellate Tribunal was based on some perverse and totally incorrect finding of fact which was contrary to material available on record or which was based on surmises and conjectures---Decision based on such erroneous finding of fact could be corrected by High Court in order to resolve actual legal controversy which could be involved in the case---Customs Appellate Tribunal, in the present case, was not able to point out any error or illegality in the order passed by Appellate authority and had simply replaced its finding on facts by placing reliance entirely on purported opinion of a company which certificate was otherwise not a conclusive evidence nor even suggested that importer made mis-declaration or had mentioned incorrect PCT Heading in the case---High Court answered the question in negative in favour of importer and against the department---Reference was allowed in circumstances.

Sohail Muzaffar and Fauzia Rasheed for Applicant.

Ghulam Haider Shaikh for Respondent.

Date of hearing: 29th January, 2015.

2015 P T D 2533

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

COMMISSIONER INLAND REVENUE (ZONE-IV)

Versus

Messrs MEDICAIDS PAKISTAN (PVT.) LTD.

I.T.R.A. No.251 of 2011, decided on 10th August, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133(1), 153 & 169(1)(6)---Final Tax Regime---Toll manufacturing receipts---Concurrent findings of fact by the forums below---Plea raised by authorities was that toll manufacturing receipts by assessee were assessable under Final Tax Regime for being contractual in nature and could not be subjected to normal tax regime--Validity---Taxation Officer was not justified to treat toll manufacturing receipts of assessee company for the tax year under reference, to be covered under Final Tax Regime, as the assessee was not engaged in any manufacturing of medicines for its own use and rendered service of toll manufacturing to third party under a contract of service---Appellate Tribunal Inland Revenue rightly confirmed the order of the appellate authority and dismissed the appeal filed by Inland Revenue on the subject controversy---High Court declined to interfere in concurrent findings recorded by two appellate forums below as the same did not suffer from any factual or legal error---Reference was dismissed in circumstances.

Federation of Pakistan through Secretary Ministry of Finance and others v. Haji Muhammad Sadiq and others PLD 2007 SC 133; Federation of Pakistan and others v. Haji Muhammad Sadiq and others 2007 PTD 67 = 2007 CLD 1; Burmah Oil Company Limited v. The Trustees for the Port of Chittagong PLD 1961 SC 452 and Golden Roadways Transport Bus Service v. Executive Officer, Cantonment Board, Okara 1986 SCMR 1142 ref.

Jawaid Farooqui for Applicant.

Arshad Siraj for Respondent.

Date of hearing: 13th May, 2015.

2015 P T D 2552

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs NATIONAL GASES LTD. through Company Secretary

Versus

MINISTRY OF RAILWAY through Federal Secretary Railways and 2 others

C.P. No.D-2535 of 2010, decided on 12th February, 2014.

Sales Tax Act (VII of 1990)---

----S. 5---Sale of Goods Act (III of 1930), S. 64-A(a)---Constitution of Pakistan, Art. 199---Constitutional petition---Rate of tax and duties, determination of---Factual controversy---Petitioner company contended that it was entitled for payment of any increase in the amount of taxes subsequent to an award of contract---Plea raised by authorities was that claim of petitioner was a disputed fact---Validity---Facts as averred by petitioner were seriously disputed by authorities---Relief sought by petitioner was primarily with regard to enforcement of contractual obligation between the parties which could not be enforced or granted while exercising discretionary jurisdiction of High Court under Art. 199 of the Constitution---Appropriate remedies in such matter was through a suit before Civil Court of competent jurisdiction---Petition was dismissed in circumstances.

Chaudhry Brothers v. Province of Punjab through Secretary/Chief Purchase Officer, Industries and Mineral Development Department, Lahore and 2 others 1993 MLD 2437 ref.

Pakcom Limited and others v. Federation of Pakistan and others PLD 2011 SC 44 and Nizamuddin and another v. Civil Aviation Authority and 2 others 1999 SCMR 467 rel.

Khalid Ishtiaq for Petitioner.

Hussain Baksh Saryo and Dilawar Hussain, Standing Counsel for Respondents.

Date of hearing: 12th December, 2014.

2015 P T D 2562

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs ALLIED ENGINEERING SERVICES LTD.

Versus

COMMISSIONER OF INCOME TAX and another

I.T.R.A. No.67 of 2011, decided on 10th July, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 (5A) & 133 (1)---Terms "Income year" and "assessment year"---Amendment, retrospective in nature---Scope---Plea raised by assessee was that amendment made in S. 122(5A) of Income Tax Ordinance, 2001, brought substantial change in concept of "income year" and "assessment year", and such amendment could not be retrospective in nature---Validity---Proceedings under S. 122(5A) of Income Tax Ordinance, 2001, were aimed towards enhancement of tax liability of an assessee or to create additional burden of a tax upon an assessee and such amendment could not be termed as a procedural amendment---Provisions of S. 122(5A) of Income Tax Ordinance, 2001, were substantive in nature, therefore, unless it had been specifically defined by legislature to apply the same retrospectively, the amendment was to be applied prospectively for tax year, in which, it had been introduced through Finance Act---Appellate Tribunal Inland Revenue was not justified to hold that enactment of S. 122(5A) of Income Tax Ordinance, 2001 vide Finance Act, 2003 was applicable to tax year, 2003, more particularly when the Appellate Tribunal Inland Revenue held that amendment introduced through Finance Act, 2003, by inserting S. 122(5A) of Income Tax Ordinance, 2001, was prospective in nature---High Court set aside order passed by Appellate Tribunal Inland Revenue---Reference was allowed in circumstances.

2009 PTD 1392; Kurdistan Trading Company's case 2014 PTD 339; Messrs Munir Associate's case; ITRA No.38/2010 ; Central Power Generation Company Guddo's case 2012 PTD (Trib.) 193 and Commissioner of Income Tax/Wealth Tax Companies, Peshawar v. Pakistan Refrigeration (Pvt.) Ltd., Peshawar 2012 PTD 240 ref.

Commissioner Income Tax v. Messrs Eli Lilay Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 PTD 1392 and Messrs Kurdistan Trading Company v. Commissioner Inland Revenue 2014 PTD 339 rel.

Arif Muhammad Khan and Riazuddin for Applicant.

Jawaid Farooqui for Respondents.

Date of hearing: 27th May, 2015.

2015 P T D 2600

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs PAK SUZUKI MOTOR COMPANY LIMITED, KARACHI

Versus

COLLECTOR OF CUSTOMS, APPRAISEMENT COLLECTORATE, CUSTOM HOUSE, KARACHI

Spl. Custom Appeal No.25 of 2004, decided on 28th October, 2014

Customs Act (IV of 1969)---

----S.196(1)---Reference jurisdiction of High Court---Scope---Expressions "point of law" and "question of law"---Factual controversy---Formulating of questions---Principles---Assessee assailed order passed by Customs, Excise and Sales Tax Appellate Tribunal and formulated questions of disputed facts for determination by High Court---Validity---In terms of S. 196 (1) of Customs Act, 1969, only substantial questions of law, arising out of order of the Tribunal could be referred for opinion of High Court through reference application, whereas questions of disputed facts could not be examined by High Court under reference jurisdiction---Expression "point of law" could not be equated with expression "question of law" whereas a question of law for opinion of High Court in real sense must be a disputed or disputable question of law---Questions of law referred for opinion by High Court must be formulated in such a manner that reply to such question referred to High Court could be either in affirmative or negative and it should normally settle a pattern of guidance both for the Revenue as well as the assessee---Factual controversies should not be allowed to be converted into legal issues only by employing legal language in such a manner which was usual to forming of such questions---High Court declined to interfere in the matter as no question of law had arisen from order passed by Customs, Excise and Sales Tax Appellate Tribunal, whereas decision was based on concurrent finding on facts, which did not suffer from any error or perversity---Reference was dismissed in circumstances.

Gold Trade Impex v. Appellate Tribunal of Customs, Excise and Sales Tax, Excise and Sales Tax 2012 PTD 377; Commissioner of Income Tax v. Messrs Immion International, Lahore 2001 PTD 900; Japan Storage Battery Limited v. Commissioner of Income Tax 2003 PTD 2849; Collector of Customs, Port Muhammad Bin Qasim, Karachi v. Kaghan Ghee Mills (Pvt.) Ltd. 2008 SCMR 1538 and Collector of Customs v. Qasim International Container Terminal (Pak) Ltd. 2013 PTD 392 (SHC) ref.

I.H. Zaidi for Appellant.

Ms. Masooda Siraj for Respondents.

Muhammad Farooq Khan, Law Officer Appraisement.

Nayyar Shafiq, Additional Collector Appraisement.

Date of hearing: 28th October, 2014.

2015 P T D 2651

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

The COLLECTOR OF CUSTOMS

Versus

Messrs ASIF ALI and another

Special Customs Reference Application No.75 of 2014, decided on 15th May, 2015.

Customs Act (IV of 1969)---

----Ss. 2(s), 15, 16, 26 & 187---Reference to High Court---Disputed question of fact---Vehicle in question was seized from respondent by Customs authorities alleging the same to be smuggled vehicle---Order of authorities was set aside by Customs Appellate Tribunal holding that no case of smuggling was made out---Validity---Order passed by Appellate Tribunal did not suffer from any error or illegality, finding of fact recorded by the Tribunal did not require any interference by High Court in Reference---Decision of Appellate Tribunal was based on finding of facts which did not give rise to any question of law, requiring any opinion of High Court---Reference was dismissed in circumstances.

Assistant Director, Intelligence and Investigation, Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485; C.P.No.D-2280/ 2010 and Spl. Customs Ref. Application Nos.263/2010, 245/2008 and 253/2008 ref.

S. Mohsin Imam for Applicant.

Nemo for Respondents.

Date of hearing: 15th May, 2015.

2015 P T D 1

[Lahore High Court]

Before Syed Mansoor Ali Shah and Atir Mahmood, JJ

Messrs LAHORE ELECTRIC SUPPLY COMPANY LTD. through Director Legal

Versus

FEDERAL BOARD OF REVENUE through Chairman and 2 others

I.C.A. No.79 of 2014 in Writ Petition No.29138 of 2013, heard on 22nd May, 2014.

Sales Tax Act (VII of 1990)---

----Ss.11A, 11 & 48---Law Reforms (Amendment) Act (VIII of 1972), S.3---Intra Court Appeal---Interpretation of S.11A of the Sales Tax Act, 1990---Phrase "tax due as indicated in his return"; connotation and scope---Contention of taxpayer/appellant was that S.11 of the Sales Tax Act, 1990 had a limited application and only if amount of tax due indicated by the taxpayer in the sales tax return was not paid, only then action for recovery under S. 11A of the Sales Tax Act, 1990 could be initiated---Held, that S.11A of the Sales Tax Act, 1990 was neither a dispute settlement provision nor a provision which dealt with assessment of tax but was in fact a special recovery provision akin to S.48 of the Sales Tax Act, 1990---Section 11A proceeded on the assumption that self-assessed tax due indicated in the sales tax return of the taxpayer was correct and final and therefore in case of failure to pay or making short payment of the same, recovery of the differential amount was initiated without further ado and requirement of due process through issuance of show-cause notice was dispensed with---Amount of tax in the present case, was being disputed by the Department, therefore, in such eventuality, statutory assessment was required under S.11 of the Sales Tax Act, 1990 and S.11A had no application to the case of the taxpayer---For S.11A of the Sales Tax Act, 1990 to come into operation, only the amount of tax due indicated by the taxpayer was to be considered; and even though the taxpayer was under a legal obligation to file a true and correct return, any alleged violation of the same could only be resolved through the adjudication process provided under S.11 of the Sales Tax Act, 1990; subject to the selection of the case of the taxpayer under the Sales Tax Act, 1990 and not through the mechanism of S.11A of the Sales Tax Act, 1990---Section 11A of the Sales Tax Act, 1990 was purely a recovery provision; and under said section, the amount of tax due indicated by the taxpayer in the sales tax return was considered to be correct and final and was then used as benchmark to see whether the taxpayer had deposited the said amount of tax along with the sales tax return---In case of failure to deposit such indicated amount of tax due, or in case of short payment of the same, recovery proceedings could be initiated against taxpayer under S. 11A of the Sales Tax Act, 1990---High Court observed that S.11A of the Sales Tax Act, 1990 had practically lost its efficacy after the new electronic filling system had been enforced which did not entertain any electronic return if the amount of tax deposited by the taxpayer was less than the amount of tax due as indicated in the return---Intra-court appeal was allowed, in circumstances.

Shahbaz Butt and Khurram Shahbaz Butt for Appellant.

Ch. Muhammad Zafar Iqbal assisted by Abdul Latif Tariq and Muhammad Yahya Johar for Respondents.

Raja Ashfaq, Deputy Commissioner, RTO-I, Zone-I, Lahore.

Date of hearing: 22nd May, 2014.

2015 P T D 120

[Lahore High Court]

Before Muhammad Tariq Abbasi and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

TARIQ MEHMOOD and 2 others

I.T.A.R. No.79 of 2012, heard on 19th August, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.132, 133 & 221---Rectification of mistake---Limitation---Reference to High Court---Scope---Appellate Tribunal Inland Revenue declined to rectify mistake---Plea raised by assessee was that no reference could be filed against order declining to rectify mistake---Validity---Reference application under S. 133 of Income Tax Ordinance, 2001, could be filed only against order passed under S. 132 of Income Tax Ordinance, 2001---On exercise of jurisdiction under S.122 of Income Tax Ordinance, 2001, if order under S.132 of Income Tax Ordinance, 2001, was rectified in a way that a consequent change effected rights of either Commissioner or Taxpayer, then Reference Application could be filed---Doctrine of merger would apply i.e. order under S. 221 of Income Tax Ordinance, 2001, to the extent of rectification/change would merge into the order under S. 132 of Income Tax Ordinance, 2001---As cause of action was to accrue on the date of rectification Order, therefore, period of ninety days would start from such point---Conversely if no change/ rectification was made in the order under S. 132 of Income Tax Ordinance, 2001, the order passed under S. 221 of Income Tax Ordinance, 2001, would stand alone and independent, against which, Reference Application was not allowed---Appellate Tribunal Inland Revenue refused to rectify order under S. 132 of Income Tax Ordinance, 2001, therefore, Reference Application, proposing question from order under S. 221 of Income Tax Ordinance, 2001, was not entertainable---Reference was dismissed in circumstances.

Commissioner of Income Tax/Wealth Tax, Faisalabad Zone, Faisalabad v. Muhammad Sharif 2009 PTD 536 and Commissioner of Income Tax, Rawalpindi v. Mst. Shakeela Bano 2002 PTD 1209 ref.

Muhammad Irshad Chaudhry along with Tahir Mehmood Bhatti Inland Revenue Officer, Legal-1, Zone-1, Regional Tax Officer, Rawalpindi for Petitioners.

Hafiz Muhamamd Idrees for Respondent No.1.

Date of hearing: 19th August, 2014.

2015 P T D 152

[Lahore High Court]

Before Mrs. Ayesha A. Malik and Shezada Mazhar, JJ

UNITED SUGAR MILLS LTD. Through Executive Director Finance

Versus

FEDERAL BOARD OF REVENUE through Chairman and 5 others

S.T.R. No.5 of 2009, decided on 19th February, 2014.

Sales Tax Act (VII of 1990)---

----Ss.2 (46)(e), 7 (1), 20, 34, 47 & 73---Taxable supplies---Proof of payment---Demand of additional tax---Penalty on advances---Assessee failed to provide proof of payment under S. 73 of Sales Tax Act, 1990 and adjudicating as well as appellate authorities passed order against assessee---Validity---Held, it was mandatory for a registered person to claim adjustment of input tax for which he had received payment in accordance with S. 73 of Sales Tax Act, 1990---In absence of proof of payment under S. 73 of Sales Tax Act, 1990, Appellate Tribunal rightly denied adjustment---It was required under S. 20 of Sales Tax Act, 1990, that a registered person was to inform Collector or Local Sales Tax Officer within 14 days, if he had changed any particular as stated in his registration application---Suppliers of assessee did hot make any application / intimation to Collector or local Sales Tax Officer---Authorities sought proof of supplies as well as payment which assessee failed to provide---In absence of proof of supplies as well as payment, Appellate Tribunal rightly considered supplies to un-registered person---Principal amount of sales tax already stood deposited at the time of taxable supply / delivery of goods made by assessee---Liability raised in show cause notice was with respect to additional tax and penalty-Neither adjudicating authority nor appellate authorities tried to ascertain whether non-payment of sales tax at the time of receipt of advance was wilfull act of assessee or was with mala fide intention by assessee---High Court remanded the matter to adjudication authority to the extent of demand of additional tax and penalty on advances received by assessee for redetermination of liability of assessee-High Court modified the order passed by Appellate Tribunal to such extent-- Reference was allowed accordingly.

D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 and Maple Leaf Cement Factory

Limited v. The Federation of Pakistan and others 1999 PTD 3907 ref.

Ijaz Ahmad Awan for Petitioner.

Zahoor Ali Nasir for Respondents.

Date of hearing: 4th February, 2014.

2015 P T D 175

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs ZIA BROTHERS

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.27097 of 2013, heard on 5th May, 2014.

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

----Ss.3(1A), 2(41), & 13---Sales Tax Rules, 2006, Rr. 4 & 3---Constitution of Pakistan, Art. 199---S.R.O. No. 648(I)/2013 dated 9-7-2013---Constitutional petition---Interpretation of S. 3(1A) of the Sales Tax Act, 1990---Scope and applicability of "further tax" on unregistered persons not making "taxable supplies"---Petitioners who were manufacturers and sellers of flour, and exempt under the Sales Tax Act, 1990 had impugned the imposition of further tax under S.3(1A) of the Act---Contention of petitioners was that since the petitioners did not make any "taxable supplies", they were therefore not bound to obtain sales tax registration; and were under no obligation to pay "further tax" under S.3(1A) of the Sales Tax Act, 1990---Held, that scope and purpose of S.3(1A) of the Sales Tax Act, 1990 was to broaden the tax net by incentivizing registration under the Sales Tax Act, 1990; and the same was achieved by the Legislature by building a disincentive for persons who had not obtained registration number under the Sales Tax Act, 1990, by enhancing and loading the price of taxable supplies made to them with the "further tax" at the rate of one percent of the value of the taxable supply---Petitioners, in the present case, being manufacturers and sellers of flour stood exempted from payment of sales tax under the Sales Tax Act, 1990; and by virtue of said exemption, fell outside the scope and meaning of "taxable supplies" under S.2(41) of the Sales Tax Act, 1990---Petitioners, having not made any "taxable supplies" were therefore, not bound to register under the Sales Tax Act, 1990---Rule 4 of the Sales Tax Rules, 2006 provided that only persons making "taxable supplies" were under an obligation to register, and under S.2(41) of the Sales Tax Act, 1990---Taxable supply was the "supply of taxable goods other than a supply of goods which was exempt under S.13 of the Sales Tax Act, 1990", which was the case of the petitioners---Section 3(1A) therefore, had no applicability to the case of the petitioners, and they could not be burdened with the charge of "further tax"---High Court further observed that since the petitioners had paid the "further tax" during pendency of the Constitutional petitions, therefore, they were entitled to refund/adjustment for the same, and directed the Federal Board of Revenue to device a mechanism to provide relief to the petitioners---Constitutional petitions were allowed, accordingly.

Messrs Riaz Bottlers (Pvt.) Ltd. v. Federation of Pakistan through Ministry of Finance, Revenue and Economic Affairs, Islamabad and 3 others 2000 PTD 485; Tandlianwala Sugar Mills Ltd., and others v. Federation of Pakistan through Secretary, Ministry of Finance, Revenue and Economic Affairs, Islamabad and others 2001 PTD 2094 and The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited, Lahore and others 1999 PTD 2174 distinguished.

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

----Ss.3(1A) & 2(40)---Scope of tax---Object and scope and purpose of "further tax" under S. 3(1A) of the Sales Tax Act, 1990---Unregistered persons making non-taxable supplies---Applicability of "further tax" on such persons---Purpose of S. 3(1A) of the Sales Tax Act, 1990 in imposing further tax on a person who failed to obtain sales tax registration was to incentivize such a person to register and implied that the person was under a lawful obligation to obtain registration number and had, for some reason failed to do so.---Such carrot and stick policy was to induce a person to register and also to enforce the legislative intent of registering persons making taxable supplies---On a policy level, wisdom behind such provision of law was to move towards a more documented economy and help expand the tax base---Persons who did not make taxable supplies under the law were under no legal obligation to register and, therefore, S. 3(1A) of the Sales Tax Act, 1990 did not relate to such persons and they could not be burdened with the charge of "further tax" for not doing an act they were, under the law, not supposed to do.

Khurram Shahbaz Butt for Petitioner (in Writ Petitions Nos. 27097, 27099, 27100, 27104, 27130, 27309 and 29352 of 2013).

Maqbool Ahmed Cheema for Petitioner (in Writ Petitions Nos.7691 and 4556 of 2014).

Muhammad Ajmal Khan for Petitioner (in Writ Petition No. 7112 of 2014).

Jan Muhammad Ch. for Petitioner (in Writ Petition No.7100 of 2014).

Umer Farooq for Petitioner (in Writ Petition No.7100 of 2014).

Muhammad Mehmood Khan, Deputy Attorney General for Respondent.

Muhammad Ilyas Khan for Respondent (in Writ Petitions Nos.27099, 29352 and 27309 of 2013).

Muhammad Yahya Johar for Respondent (in Writ Petitions Nos.27097, 27099, 27100, 27104, 27130, 27309, 29352, 33162 of 2013, 7100, 7691, 4556 and 7112 of 2014).

Liaqat Ali Chaudhry for Respondent (in Writ Petition No.7691 of 2014).

Shahid Sarwar Chahil, for Respondent (in Writ Petitions Nos.7100, 7112, 1772 and 4070 of 2014).

Irshad Hussain, Additional Commissioner Inland Revenue, Zone IV, RTO-II, Lahore.

Date of hearing: 5th May, 2014.

2015 P T D 221

[Lahore High Court]

Before Ayesha A. Malik and Shams Mahmood Mirza, JJ

KAMALIA SUGAR MILLS LTD. through General Manager

Versus

FEDERATION OF PAKISTAN through Ministry of Finance and 3 others

I.C.A. No.124 of 2014 in Writ Petition No.33429 of 2013, decided on 11th September, 2014.

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

----S. 40B---Federal Excise Act (VIII of 2005) S. 45(2)---Constitution of Pakistan, Art. 199---Constitutional petition---Posting of Officers of Inland Revenue/Federal Board of Revenue ("FBR") at manufacturing premises of taxpayer/petitioner---Exercise of powers under S. 40B of the Sales Tax Act, 1990 and S. 45(2) of the Federal Excise Act, 2005; interpretation and scope---Show-cause notice not required before exercising of powers under S. 40B of the Sales Tax Act, 1990 and S.45(2) of the Federal Excise Act, 2005---Taxpayers had impugned orders of Chief Commissioner Inland Revenue/FBR under S.40B of the Sales Tax Act, 1990 and 45(2) of the Federal Excise Act, 2005 whereby officers of Inland Revenue were posted at the manufacturing premises of the taxpayers---Contention of taxpayers was that such powers had been exercised without issuance of a show-cause notice to the taxpayers; therefore due process was not followed and principles of natural justice were violated---Held, that word "monitor" meant observe and check over a period of time and the FBR understood monitor to mean that team posted at manufacturing premises physically watched the production, sales and stock positions and collected data maintained by taxpayers---Respondent FBR needed to ascertain whether collected tax had been duly deposited and therefore power to monitor under the Federal Excise Act, 2005 and the Sales Tax Act, 1990 was to watch and observe and to take information maintained by the taxpayer with respect to its daily production, sales and stock position---At such stage, there was no investigation or inquiry but a simple desire to ascertain whether volume of business was duly reflected in tax returns of the taxpayers---For purposes of the FBR/Inland Revenue, no restriction had been placed by the Sales Tax Act, 1990 and Federal Excise Act, 2005 on power of monitoring; however said statutes required the Commissioner to have material evidence and pass a speaking order under S. 45(2) of the Federal Excise Act, 2005 and S.40B of the Sales Tax Act, 1990---Said sections envisioned a specific distinction in the manner in which powers were to be excised by the FBR, Chief Commissioner and Commissioner---Section 4(1)(o) of the Federal Board of Revenue Act, 2007 gave powers to make regulations, policies, programs and strategies in order to carry out purposes of said Act---In the present case, it was explained by the Chief Commissioner Inland Revenue that the entire sugar industry was under review for not paying required tax and previous data provided by taxpayers showed discrepancies when compared with present data therefore it was decided that the taxpayer's mill was to be monitored---Decision of the FBR or Chief Commissioner did not require material evidence but could be a decision based on broader principles---While at present there was no specific allegation raised against the taxpayers for evasion of tax and the taxpayers were given due notice under S. 40B of the Sales Tax Act, 1990 and S. 45(2) of the Federal Excise Act, 2005 and were given sufficient reasons for invoking of said sections---Show-cause notice, was therefore, not required and similarly a hearing was also not required because an order under S. 40B of the Sales Tax Act, 1990 and S.45(2) of the Federal Excise Act, 2005 was not an adverse order against the taxpayers---High Court also observed that the taxpayers in the present case had not challenged the vires of said sections but only impugned the orders for monitoring-----High Court further observed that in order to prevent arbitrary exercise of powers , that when such an order was passed such order must provide a reasonable timeframe within which monitor would take place and be completed and in the event that the required data and information was not obtained within the contemplated time, the FBR, Chief Commissioner or Commissioner were always free to extend the time by informing the taxpayer---Appeals and Constitutional petition of the taxpayers were dismissed, in circumstances.

Concise Oxford English Dictionary rel.

(b) Words and Phrases----

----"Monitor", meaning of---Word "monitor" means to observe and check over a period of time.

Concise Oxford English Dictionary rel.

Ali Sibtain Fazli for Appellant (in I.C.A. No.124 of 2014).

Shehzad A. Elahi for Appellant (in I.C.A. No.129 of 2014).

Ali Sibtain Fazli for Petitioner (in Writ Petition No.5072 of 2014).

Nadeem Mahmood Mian, Muhammad Ilyas Khan, Sarfraz Ahmad Cheema, Muhammad Asif Hashmi and Rana Muhammad Luqman, Commissioner, Inland Revenue, Faisalabad for Respondents.

Date of hearing: 15th April, 2014.

2015 P T D 267

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

AKHTAR SAEED MEDICAL AND DENTAL COLLEGE

Versus

FOP and others

Writ Petition No.9866 of 2014, decided on 12th May, 2014.

Income Tax Rules, 2002---

----R. 44(4)---Income Tax Ordinance (XLIX of 2001) Ss. 161 & 205---Constitution of Pakistan, Art. 199---Constitutional petition---Furnishing of annual statement of tax collected or deducted---Petitioner/taxpayer impugned notice under R. 44(4) of the Income Tax Rules, 2002 requiring him to furnish a reconciliation statement---Contention of the petitioner was that said notice was illegal and that the petitioner had already given all necessary record and information along with his tax return, and that the same was tantamount to proceedings under S. 161 of the Income Tax Ordinance 2001---Held, that the petitioner/taxpayer had only been asked to furnish required information and at such stage, contention that the same were proceedings under S. 161 of the Income Tax Ordinance 2001, was incorrect---No determination for the purposes of S. 161 of the Income Tax Ordinance, 2001 had been made and even otherwise, a perusal of the notice showed that petitioner had been asked to submit reconciliation of all payments mentioned in the annual statement along with payments made against trading and profit and loss account mentioned in income tax return and audited accounts; and the Department had clearly stipulated different heads on which information was sought and amounts paid in terms thereof; and as such no illegality was made out----Constitutional petition, being not maintainable, was dismissed.

Muhammad Ajmal Khan for Petitioner.

Kanwar Riaz Ahmad Khan for Respondents.

Date of hearing: 12th May, 2014.

2015 P T D 313

[Lahore High Court]

Before Muhammad Ameer Bhatti and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs GUL ENTERPRISES and others

S.T.R. No.1 of 2011, heard on 23rd September, 2014.

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

----Ss. 73 & 47---Transactions not admissible---Interpretation and scope of S. 73 of the Sales Tax Act, 1990---Reference to High Court---Department had found that personal bank account of taxpayer, who was the sole proprietor of the assessed firm, could not be taken as a business account and transactions therein could not be allowed for adjustment---Held, that personal bank account of owner of sole proprietorship was taken as a business account at the time of registration under the Sales Tax Act, 1990---Transactions were made through banking channels, therefore adjustment of input tax could not have been denied merely on technicalities---Perusal of order-in-original showed that input adjustments (of payments to supplier) made through the business account were allowed, however such payments made through personal bank account were not allowed---Perusal of taxpayer's profile with the Department, revealed that column of bank account was left blank which meant that no account in name of the business was available with the Department---Mere fact that account registered with department was not in name of business was not sufficient to invoke penal provisions of S. 73 of the Sales Tax Act, 1990---In order to enforce provisions of S. 73 of the Sales Tax Act 1990, business account must be the one registered with the Department in due course---Intent of Legislature was that all transactions taxable under the Sales Tax Act, 1990 must reflect from one account in order to minimize opportunities for non-compliance and misdeclaration and all transactions from one account were also necessary to trace chain of taxable supplies which ensured proper taxation and adjustment till taxable goods reach the consumer who bears burden of such tax---Taxpayer, in the present case, had given unrebutted and plausible explanation for making payments from his personal account therefore decision of Appellate Tribunal was correct---Reference was answered accordingly.

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

----Ss. 3(1), 2(33) & 2(46)---Taxable activity---"Supply", and "value of supply"---Freight, loading and unloading charges---Scope of tax---Question before High Court was whether Appellate Tribunal was justified to hold that carriage loading/unloading charges and commission were not part of the value of supply within the meaning of S.2(46) of the Sales Tax Act, 1990---Held, that before construing any transaction as taxable activity; value addition or taxable supply; the Department had to arrive at the true nature of the transaction based on correct determination of facts---Payment of freight, loading and unloading charges were not in furtherance of business carried out for consideration; rather was an ancillary service provided to the consumer; that too on an occasional basis---Two incidents of making payments for freight, loading and unloading charges could not make all transactions as taxable in the relevant period---Under S. 3(1)(a) of the Sales Tax Act, 1990; sales tax was to be levied on the value of the taxable supply made by a registered person in course or furtherance of any activity carried out by such person---Payment of freight loading and unloading charges made occasionally and recovered from consumer/customer could not be termed as taxable activity and were therefore not taxable---Reference was answered accordingly.

Collector Sales Tax and Central Excise, Rawalpindi v. Messrs Wah Nobel Chemical Ltd., Wah Cantt. 2008 PTD 1693 rel.

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

----S. 47---Appeal to High Court---Framing of questions---Words "whether or not"---Connotation---Use of the words "whether or not" would not serve the purpose, if answered in "yes" or "no".

Shaukat Ali Qureshi for Applicant.

Ch. Naeem-ul-Haq for Respondent No.1.

Date of hearing: 23rd September, 2014.

2015 P T D 394

[Lahore High Court]

Before Muhammad Tariq Abbasi and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX, RAWALPINDI

Versus

Messrs SETHI FLOUR MILLS, HASSANABDAL

Income Tax Appeal No.242 of 2000, heard on 19th August, 2014.

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

----S. 53---Advance tax---Scope---Concept of advance tax is that it is collected before determining its payability through assessment for any assessment/tax year and is adjusted against payable tax---Advance tax, paid if found in excess of payable tax, the differential amount becomes refundable and if found short of tax payable, the differential amount is to be deposited by assessee/taxpayer---Payment of advance tax being a statutory obligation, therefore, on default it entails payment of additional tax for defaulted period.

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

----Ss. 53, 86, 87, 129, 136 & 156---Advance tax---Additional tax, charging of---Payment in instalments---Assessee paid advance tax in instalments but defaulted in payment of instalments in time, therefore, authorities imposed additional tax on assessee---Validity---Provision of S. 86 of Income Tax Ordinance, 1979, was simply a charging section providing without giving any procedure for determining facts through an order---Such findings were supported by provisions of S. 129 of Income Tax Ordinance, 1979, whereunder appeals were filed before Commissioner (Appeals)---No appeal was provided against order under S. 87 of Income Tax Ordinance, 1979, as the same was not mentioned in S. 129 of Income Tax Ordinance, 1979, which had specified sections under which order passed could be assailed and it carried a mechanism for passing order under it---No order could have been passed under S. 86 of Income Tax Ordinance, 1979, independently---Income Tax Appellate Tribunal rightly treated the same to have been passed under S. 156 of Income Tax Ordinance, 1979, by implication---If the order under S. 87 of Income Tax Ordinance, 1979, was held nullity in the eye of law, the same would also be an order sustainable in the eye of law---Appeal was decided accordingly.

Messrs Pakistan Mobile Communication (Pvt.) Ltd. v. The Commissioner of Income Tax, Companies Zone, Islamabad (Civil Appeals No.1091-1092 of 2009) and Chairman, Central Board of Revenue, Islamabad and 3 others v. Messrs Pak-Saudi Fertilizer Ltd., and another 2001 SCMR 777 ref.

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

----S.136---Reference to High Court---Question, framing of---Principles---In a question proposed for opinion of High Court, words like "to hold against statutory provision" should not be used---Only findings on a law point by Income Tax Appellate Tribunal should be proposed in a question, answer of which in 'Yes' or 'No' would suffice the purpose.

Muhammad Irshad Chaudhry along with Tahir Mehmood Bhatti, Inland Revenue Officer, Legal-1, Zone-1, Regional Tax Office, Rawalpindi for Appellant.

Nemo for Respondent.

Date of hearing: 19th August, 2014.

2015 P T D 424

[Lahore High Court]

Before Syed Mansoor Ali Shah and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Maj. Gen. (R) Dr. C.M. ANWAR and 2 others

I.T.R. No.1 of 2013, heard on 25th March, 2014.

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

----S. 133 (1)---Reference to High Court---Principle---Law point was neither raised nor decided by Appellate Tribunal Inland Revenue, therefore, High Court declined to decide the reference.

Messrs Nida-i-Millat (Pvt.) Ltd., Lahore v. Commissioner of Income Tax, Zone No.1, Lahore 2006 SCMR 526 rel.

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

----Ss.120(2), 122(2) [as amended by Finance Act (I of 2009)] & 133(1)--General Clauses Act (X of 1897), S.6(1)(c)---Income tax return, finality of---Limitation---Amendment in law---Retrospective effect---Plea raised by income tax authorities was that amendment brought in S. 122(2) of Income Tax Ordinance, 2001, in year 2009 had retrospective effect and it was applicable to assessment for Tax Year, 2004---Validity---Limitation as it stood at the time of filing of return would apply---Even procedural law could not take away vested and existing rights by applying it retrospectively unless such intention of legislation was expressed in unequivocal terms---Reference was dismissed in circumstances.

Messrs Fawad Textiles Mills Ltd. through Director, Lahore v. Pakistan through Secretary, Ministry of Finance and 3 others 2005 PTD 14 and Commissioner of Income Tax v. Dharamchand Dalchand 1 ITC 264 (Nagpur) rel.

Ch. Muhammad Irshad for Applicant.

Ch. Naeem-ul-Haq and Hafiz Muhammad Idrees for Respondent No.1.

Date of hearing: 25th March, 2014.

2015 P T D 458

[Lahore High Court]

Before Shahid Jamil Khan, J

SULTAN MUHAMMAD KHAN

Versus

DEPUTY COMMISSIONER INLAND REVENUE and 3 others

Writ Petition No.1604 of 2014, decided on 17th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.139 & 140---Constitution of Pakistan, Art.199---Constitutional petition---Notice of recovery of tax---Persons holding money on behalf of taxpayer---Petitioner assailed notice of recovery of tax issued by income tax authorities on the ground that taxpayer company was still in existence---Validity---Tax had to be "any tax due by a taxpayer" and notice should have disclosed how the tax was due---If the tax was being recovered from another person i.e. who was held "liable for payment of the tax" then notice should also disclose how the other person was made liable for payment of the tax---No proceedings were undertaken to show that tax was not recoverable from the company and to hold petitioner as liable to pay tax under S. 139 of Income Tax Ordinance, 2001, after confronting and providing opportunity of being heard---Petitioner's right of "due process" and "fair trial" was found to have been violated---High Court declared notice under S. 140 of Income Tax Ordinance, 2001, issued by authorities as void---Petition was allowed in circumstances.

Sarfraz Saleem v. Federation of Pakistan and others PLD 2014 SC 232 and Babar Hussain Shah and another v. Mujeed Ahmed Khan and another 2012 SCMR 1235 ref.

Hafiz Muhammad Idrees for Petitioner.

Manzoor Hussain for Respondents Nos.1 to 3.

2015 P T D 515

[Lahore High Court]

Before Mamoon Rashid Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs MACCA CNG GAS ENTERPRISES and others

I.T.R. No.15 of 2013, decided on 6th May, 2014.

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

----Ss.132, 133 & 221---Reference to High Court---Limitation---Order passed by Appellate Tribunal Inland Revenue was assailed by authorities beyond the period of 90 days---Effect---Authorities had assailed the order rejecting application filed under S. 221 of Income Tax Ordinance, 2001, and not the one from the order under S. 132 of Income Tax Ordinance, 2001---Reference was required under S. 133(1) of Income Tax Ordinance, 2001, to be filed within 90 days from communication of order under S. 132(7) of Income Tax Ordinance, 2001---Appellate Tribunal was bound to communicate its order under S.132(7) of Income Tax Ordinance, 2001, to taxpayer and Commissioner---No reference could be filed on question arising from order passed under S. 132 of Income Tax Ordinance, 2001---Question was answered in negative in circumstances.

Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others 2013 PTD 884; Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570; Commissioner of Income-Tax Companies No.1, Karachi v. Messrs Hassan Associates (Pvt.) Ltd., Karachi 1994 PTD 1256; The Lungla (Sylhet) Tea Co. Ltd., Sylhet v. Commissioner of Income-Tax, Dacca Circle, Dacca 1970 SCMR 872; The Commissioner of Income Tax v. Messrs Smith, Kline and French of Pakistan Ltd. and others 1991 PTD 999 and 1991 SCMR 2374 ref.

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

----S.133---Reference to High Court---Jurisdiction of High Court---Scope---High Court has to decide reference application on fact and circumstances founded by Appellate Tribunal, which is the last fact finding forum---High Court cannot change finding of facts arrived at by Appellate Tribunal---Opinion of High Court under S. 133 of Income Tax Ordinance, 2001, is binding on it.

Sheikh Anwar-ul-Haq for Applicant.

Atif Waheed for Respondent No.1.

2015 P T D 545

[Lahore High Court]

Before Muhammad Ameer Bhatti and Shahid Jamil Khan, JJ

COMMISSIONER OF WEALTH TAX, RAWALPINDI---Appellant

Versus

Mrs. NAHEED MUJTABA---Respondent

I.T.A. No.194 of 2000, decided on 30th September, 2014.

Wealth Tax Act (XV of 1963)---

----Ss. 14C, 13D & 27(1)---Interpretation of S. 14C of the Wealth Tax Act, 1963---Tax on ownership of certain immovable assets---Scope---Phrase "Final Tax Liability", connotation of---Question before the High Court was whether tax under S. 14C could be treated as only advance tax; while the wealth tax paid under S. 14C was the minimum tax payable on the immovable asset---Held, that S. 14C(2) of the Wealth Tax Act, 1963 could be divided in two portions; segregated by the word "and" and literal meaning of the first portion was that amount of tax under S. 14C(1) of the Act, shall be payable as advance tax in accordance with Ss. 13A & 13D of the Wealth Tax Act, 1963; which shall be the minimum amount of tax payable under S. 14C---Section 14C(2) of the Wealth Tax Act, 1963 provided mode of paying tax under S. 14C(1) of the Act, which was required to be deposited in advance as per S. 13D(2) of the Wealth Tax Act, 1963---Second portion of S. 14C(2) of the Wealth Tax Act, 1963 included the phrase "Final Tax Liability", which was to be determined for any financial year on the "net wealth" which was taxable under the Wealth Tax Act, 1963----Advance tax, paid under S. 14C(1), if was in excess, then it was to be adjustable against "Final Tax Liability"; however if the "Final Tax Liability" was less than the tax charged under S. 14C(1) of the Wealth Tax Act, 1963; then the tax so charged was the minimum tax liability, and no refund was allowable on the tax paid in excess of the Final Tax Liability---No provisions existed in the Wealth Tax Act, 1963 which allowed double taxation of an immovable asset---Section 14C(1) was a non-obstante provision but it excluded only other rates of tax on immovable asset covered under it; had it intended to tax immovable asset in addition to the normal rate of tax, it would have been couched in the words "notwithstanding the levy of tax by any other provisions"---Charging of tax under S. 14C of the Wealth Tax Act, 1963 without show cause notice, after charging tax at normal rate, was therefore, illegal---Reference was answered, accordingly.

Manzoor Hussain for Appellant.

Nemo for Respondent.

Date of hearing: 30th September, 2014.

2015 P T D 560

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

Messrs O.S. CORPORATION through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division 3 and others

Writ Petition No.7972 of 2014, decided on 3rd April, 2014.

Customs Act (IV of 1969)---

----S.186---Constitution of Pakistan, Art.199---Constitutional petition---Detaining of goods---Fine or penalty, non-imposing of---Grievance of importer was that despite payment of all duty and taxes, and release of goods, authorities had illegally detained goods at the exit gate---Validity---As no fine or penalty had been imposed or was even under consideration at the relevant time, therefore, provisions of S. 186 of Customs Act, 1969, were not relevant---Authorities were acting on a hunch and still had to satisfy themselves that goods imported by importer were in fact tin plates and not electrical silicon steel sheets---Authorities also could not show whether any investigation or adjudicatory process was pending under Customs Act, 1969, against importer---Consignments were opened and samples were drawn by authorities to check contents of consignments and two reports were furnished in favour of importer---Allegation of mala fide on the part of testing laboratory had also been inferred by authorities but there was nothing on record to substantiate such claim---Detaining goods at exit gate after having released by them was totally contrary to the provisions of Customs Act, 1969---Authorities had available to them provisions of Customs Act, 1969, and to proceed with the matter where they were unsure of classification or status of goods imported---Due process was followed and goods were cleared---While acting on a hunch, authorities detained goods at exit gate even though taxes and duties were paid and goods had been released---High Court directed the authorities to release goods of importer instantly---Petition was allowed in circumstances.

Mian Abdul Ghaffar for Petitioner.

Ch. Muhammad Zafar Iqbal along with, Aziz-ur-Rehman Principal Appraiser Customs and Nadeem Mahmood Mian, Standing Counsel for Respondents.

Date of hearing: 3rd April, 2014.

2015 P T D 649

[Lahore High Court]

Before Shezada Mazhar and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX, RAWALPINDI

versus

Messrs ZULFIQAR AHMED

I.T.A. No.78 of 2000, heard on 15th April, 2014.

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

----Ss. 138EE, 138C(2A), 138D & 136---Interpretation of Ss.138EE, 138C, & 138D of the Income Tax Ordinance, 1979---Income Tax Settlement Commission, powers of---Scope---Order of Income Tax Settlement Commission to withdraw appeal filed by Department, not binding on Income Tax Appellate Tribunal---Department had filed appeal before Appellate Tribunal whereafter in view of order of Income Tax Settlement Commission; Department sought withdrawal of said appeal, which was denied by the Appellate Tribunal---Contention of Department was that after order of the Income Tax Settlement Commission under S. 138EE of the Income Tax Ordinance 1979; the Appellate Tribunal could not have adjudged the appeal and request to withdraw appeal could not have been declined----Held, that perusal of S. 138EE of the Income Tax Ordinance, 1979 revealed that the said section envisaged only a direction to the Commissioner/Department to withdraw appeal preferred by it before the Appellate Tribunal; and it was not ascertainable from the same whether such order was binding on the Appellate Tribunal---Provisions of S. 138EE if read in the background of provisions of Ss. 138C & 138D of the Income Tax Ordinance, 1979 revealed that the Income Tax Settlement Commission was empowered to dispose of cases in second appeal by asking Commissioner to withdraw any appeal filed by the Department before the Income Tax Appellate Tribunal; however no provisions in the Income Tax Ordinance, 1979 were found which would make such order of the Income Tax Settlement Commission binding on the Appellate Tribunal---High Court observed that in the present case, the order of the Income Tax Settlement Commission did not disclose whether the taxpayer/assesee had approached the Income Tax Settlement Commission for settlement and therefore, participation of the taxpayer/assessee was found to be not voluntary, since the taxpayer did not request or support the request for withdrawal of appeal before Appellate Tribunal---Order of Appellate Tribunal was therefore, correct---Reference was answered, accordingly.

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

----O. XXIII, R 1---Withdrawal of suit---Scope---Order XXIII, R.1 of C.P.C. allowed plaintiff to withdraw a suit, but such right was not absolute---Withdrawal of a suit could not be allowed if it resulted in perpetuating a fraud, injustice, or if such withdrawal would otherwise defeat ends of justice.

Javaid Iqbal Abbasi and Company v. Province of Punjab and

6 others 1996 SCMR 1433 and Haji Muhammad Boota and others v. Member (Revenue), Board of Revenue, Punjab and others PLD 2003 SC 979 rel.

Muhammad Irshad Chaudhary for Appellant.

Nemo for Respondent.

Date of hearing: 15th April, 2014.

2015 P T D 681

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX

versus

Messr DOABA PLASTICS INDUSTRIES (PVT.) LTD.

P.T.Rs. Nos.309, 444 to 446, 590, 610 to 614, 619, 630, 646, 647, 483 of 2010, 45, 48, 114, 152, 155, 171, 181, 231, 233, 236 to 238, 242 of 2011 and 6, 299, 335, 354, 562, 571 of 2012, decided on 3rd December, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.121(1)(d), 120, 177, 122 & 133---Constitution of Pakistan, Art.189---Reference to High Court---Best judgment assessment---Audit proceedings---Failure to produce documents or records required to be maintained---Validity of order for best-judgment assessment under S.121(1)(d) of the Income Tax Ordinance, 2001 in presence of existing assessment order under S.120 of the Income Tax Ordinance, 2001----Scope----Question before the High Court was whether provisions of S.121(1)(d) of the Income Tax Ordinance, 2001 could be invoked for non-submission of documents during audit proceedings, in presence of an assessment order under S.120 of the Income Tax Ordinance, 2001----Contention of department was inter alia that such an order could be passed in light of judgment of Sindh High Court in Messrs Sarah Construction Co. v. Taxation Officer-4, Audit-2 Karachi and others (2013 PTD 682)----Held, that High Court in Commissioner Inland Revenue (Legal) v. Commissioner Inland Revenue (Appeals) and others (2013 PTD 837) had answered the said legal proposition / question of law against the Department and had held that an order under S.121 of the Income Tax Ordinance, 2001 for best judgment assessment could not be passed in presence of an assessment order under S.120 of the Ordinance, and said judgment of Lahore High Court had been upheld by the Supreme Court of Pakistan vide order dated 9-5-2013 in Civil Petition No. 526 of 2013; therefore, contention of Department had no force in view of Art.189 of the Constitution---High Court observed that judgment of the Sindh High Court in Messrs Sarah Construction Co. v. Taxation Officer-4, Audit-2 Karachi and others (2013 PTD 682) was per incuriam for having placed reliance on irrelevant provisions of law due to lack of proper assistance---High Court held that order under S.121(1)(d) of the Income Tax Ordinance, 2001, could therefore not be passed in presence of an assessment under S.120 of the Income Tax Ordinance, 2001---Reference was answered, accordingly.

Commissioner Inland Revenue (Legal) v. Commissioner Inland Revenue (Appeals) and others 2013 PTD 837 and Civil Petition No.526 of 2013 rel.

Messrs Sarah Construction Co., through Partner, Karachi v. Taxation Officer-5, Audit-2, Karachi and others 2013 PTD 682 per incuriam.

Ehsan-ur-Rehman Sheikh for Applicants (in PTRs Nos.483 of 2010 and 562 of 2012).

Muhammad Ilyas Khan for Applicants (in PTRs Nos.444, 445, 446 of 2010, 45, 48 of 2011 and 6 of 2012).

Muhammad Asif Hashmi for Applicants (in PTRs Nos. 236, 237, 238 of 2011 and 335, 354 of 2012).

Khadim Hussain Zahid for Applicants (in PTRs Nos. 610, 611, 612, 613, 614 of 2010, 114, 231, 233, 242 of 2011 and 299 of 2012).

Amjad Hussain Malik for Applicants (in PTRs Nos. 309, 590, 646, 647 of 2010, 152, 155,181 of 2011 and 354 of 2012).

Javed Akhtar for Applicant (in PTR No. 630 of 2010).

Ali Babar on behalf of Muhammad Amir Malik for Applicant (in PTR No. 171 of 2011).

Nemo for Respondents.

Date of hearing: 3rd December, 2014.

2015 P T D 772

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

Messrs GHAUSIA BUILDERS (PVT.) LTD.

P.T.R. No.284 of 2014 in I.T.As. Nos. 216 and 217/LB of 2013, decided on 24th November, 2014.

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

----Ss. 122(4), 122(2), 120 & 133---Finance Act (I of 2009) S. 5(21)---Further amendment of assessment under S. 122(4) of the Income Tax Ordinance, 2001---Effect of change in the commencement of five year period of limitation for amendment of assessment provided in S. 122(4) of the Income Tax Ordinance, 2001; vide S. 5(21) of the Finance Act, 2009---Retrospective effect of such amendment---Taxpayer filed his tax return in the year 2006; and assessment order was amended under S.122 of the Income Tax Ordinance 2009 in the year 2012---At the time the taxpayer filed his tax return, period of commencement of limitation under S. 122(4) of the Income Tax Ordinance was to run from the date of original assessment order, however vide Finance Act, 2009, the same was amended to commence from the end of financial year (June, 2007)---Question before the High Court was "whether effect of the amendment which changed the commencement of the period of limitation in S. 122(4) was applicable to the case of the taxpayer"---Held, that the amendment made in S. 122(2) of the Income Tax Ordinance, 2001 through the Finance Act, 2009 could not be applied retrospectively and limitation as it stood at the time of filing of return, would be applicable to the case of the taxpayer---Section 122(4) of the Income Tax Ordinance, 2001 also prescribed a period of limitation of five years for further amendment and subsequently provisions were amended for counting period of limitation from the end of the financial year when the assessment order was passed---Pre and post amended provisions of S. 122(4) & S. 122(2) of the Income Tax Ordinance, 2001; being identical in nature; the ratio decidendi of the Superior Courts judgments applicable to S. 122(2) of the Income Tax Ordinance, 2001 would also apply to S. 122(4) of the Income Tax Ordinance, 2001---Amendments in Ss. 122(2) & 122(4) of the Income Tax Ordinance, 2001 were not a direct case of enlargement of limitation period by extending the terminal date of limitation but were a change in the date of commencement of the period of limitation; therefore argument that no vested right accrued to the taxpayer when amendment in S. 122(4) of the Income Tax Ordinance, 2001 was made, was misconceived as the commencement date had already been availed by the taxpayer by filing his returns which were an assessment order under S.120 of the Income Tax Ordinance, 2001 and said commencement date could not be changed by giving same a retrospective effect after amendments in Ss. 122(2) & 122(4) of the Income Tax Ordinance, 2001---Once the taxpayer triggered the date of commencement of the limitation period by filing returns, vested right already accrued in its favour through the statutory enactment that after afflux of five years, the assessment could not be opened or amended; and after passage of the said five years; the said date of commencement became a past and closed transaction; and therefore the amended provisions of Ss. 122(2) & 122(4) of the Income Tax Ordinance, 2001 could not be applied retrospectively merely by construction to change the date of commencement of limitation unless the legislature had by express words or necessary implication, had intended to give it such retrospective effect---Reference was answered, accordingly.

The Commissioner of Income Tax, Central Zone 'B' Karachi v. Messrs Asbestos Cement Industries Limited, Karachi 1993 PTD 459; Zeal Pak Industries (Pvt.) Ltd., Karachi v. Regional Commissioner, Income Tax, Karachi and 2 others 2009 PTD 712 and Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward Layallpur and others 1963 PTD 633 ref.

CIR v. Major General Retd. Dr. C.M. Anwar and others PTCL 2014 CL 608; CIR v. Messrs D.S. Textile Mills Ltd. PTR No.277/2014; Commissioner of Income Tax v. Major General (R) Dr. C.M Anwar and others Civil Petition No.1306 of 2014; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan Private Ltd. 2009 PTD 1392 and Nagina Silk Mill Layallpur v. The Income Tax Officer and others PLD 1963 SC 322 rel.

(b) Interpretation of statutes---

----Tax statute---Amendment in period of limitation---Retrospective effect of such amendment---Scope----Period of limitation was to be considered as procedural law and normally applied retrospectively; however, when a right had accrued to the taxpayer at the commencement of a period of limitation through a statutory enactment, then after afflux of a certain period of time, the assessment could not be opened or amended, and the procedural provision to impair said accrued vested right, could not be applied retrospectively, through mere construction, unless the Legislature had, by its express words or necessary implication, given it such retrospective effect---Proper approach to interpretation to determine whether an amendment had retrospective effect, was not by looking at the "label" applied to such an amendment that is, procedural or substantive; but it was to be seen whether the amendment in the statute, if applied respectively, would impair existing rights including rights protected by substantive provisions of law---Law, if it destroyed existing rights or even placed any restriction on it, could not be given retrospective effect unless the statute expressly was enacted to that effect.

Ch. Mukhtar Ahmad Gondal for Petitioner.

2015 P T D 812

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

Messrs IHSAN YOUSAF TEXTILES (PVT.) LTD.

versus

COMMISSIONER OF INCOME TAX

P.T.R. No.408 of 2003, heard on 13th November, 2014.

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

----Ss. 50(4), 52 & 133---S.R.O. No.368(I)/94 dated 7-5-1994---Reference to High Court---Payment of tax before assessment---Deduction of tax at source---Taxable supplies---Exemption from deduction of tax at source provided in S.R.O. No.368(I)/94 dated 7-5-1994---Payments made on account of supply of goods which were purchased in respect of goods exported outside Pakistan---Scope---Taxpayer was an exporter of cloth and did not deduct advance tax under S. 50(4) of the Income Tax Ordinance, 1979 at the time of making payment to third party suppliers from whom taxpayer procured yarn; and was held in default of tax under S. 52 of the Income Tax Ordinance, 1979 by the Department---Contention of taxpayer was inter alia that the taxpayer was exempted from provisions of S. 50(4) of the Income Tax Ordinance, 1979 in view of exemption provided in S.R.O. No.368(I)/94 dated 7-5-1994----Validity---Held, S.R.O. No.368(I)/94 dated 7-5-1994 related to a person making payments against "supply of goods" but it did not exempt a person from applicability of S. 50(4) of the Income Tax Ordinance, 1979 who was making payment to a third party against service rendered or in execution of a contract---Terms "payments against supply of good" and "payment against service rendered" and "execution of contract" were three distinct and independent transactions---Taxpayer, in the present case, was not a manufacturing unit of cloth; nor was the taxpayer claiming that it purchased cloth directly form the market---Contention of the taxpayer was that he was exempted under the said S.R.O. from deduction of advance tax from payments made to weavers against manufacturing of cloth supplied by the taxpayer; and said contention was misconceived as plain reading of S.R.O. No.368(I)/94 dated 7-5-1994 showed that merely being an exporter would not ipso facto bring the taxpayer within the ambit of S.R.O. No.368(I)/94 dated 7-5-1994---Said exemption was only available to exporters who were making payment on account of supply of such goods that were purchased in respect of goods exported and any payment made against service rendered or in execution of contract, whether it brought value addition to the goods or not, would not exclude such payment from within purview of S. 50(4) of the Income Tax Ordinance, 1979---No illegality therefore existed in the impugned orders---Reference was answered, accordingly.

Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. PLD 1990 SC 68; Messrs Mehran Associates Ltd. v. The Commissioner of Income Tax, Karachi 1993 SCMR 274 and Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

(b) Interpretation of statutes---

----Taxing statute---One had to look merely at what was clearly said and there was no room for any intendment or presumption as to a tax.

Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. PLD 1990 SC 68 and Messrs Mehran Associates Ltd. v. The Commissioner of Income Tax, Karachi 1993 SCMR 274 rel.

(c) Taxation---

----Exemption---Exemption from payment of tax---Statutory construction of exempting statutes and SROs---Scope-----All exemptions from taxation, including SROs, increased burden on other members of the community; and the same should be deprecated, except to the extent permissible by the express language of the statute itself---All exemptions from taxation must be given a rigid interpretation against the assertion of the taxpayer and in favour of the taxing power.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 rel.

Shahbaz Butt and M. Shakeel for Petitioner.

Khadim Hussain Zahid for Respondent.

Date of hearing: 13th November, 2014.

2015 P T D 863

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

Messrs PEPCO PAKISTAN.

P.T.R. No.276 of 2014, decided on 10th November, 2014.

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

----Ss. 147(7), 147(8), 161 & 162---Advance tax---Nature and concept examined.

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

----Ss. 162, 169(3), 161, 148, 115, 122 & 120---Reference to High Court---Final Tax Regime---Recovery of tax from the person from whom tax was not collected or deducted---Tax collected and deducted as "final tax"---Scope and nature of Ss. 162 & 161 of the Income Tax Ordinance, 2001---"Tax due" and "advance tax recoverable"---Distinction---Change of character of "advance tax" to "tax due" by application of S. 169(3) of the Income Tax Ordinance, 2001---Question before the High Court was whether tax deducted at the import stage under S. 148 Income Tax Ordinance, 2001 could be recovered under provisions of S. 162 of the Ordinance after completion of assessment vide application of S. 169(3) of the Income Tax Ordinance, 2001 where statement filed under S. 115(4) of the Income Tax Ordinance, 2001 was to be treated as assessment under S. 120 of the Income Tax Ordinance, 2001---Held, that S. 162 of the Income Tax Ordinance, 2001 was meant to recover advance tax from the person "from whom it was to be collected or deducted", and thus S. 162 of the Income Tax Ordinance, 2001 could not be invoked after completion of assessment when tax payable for a tax year was determined and paid----"Advance tax recoverable" and "tax due recoverable" were two distinct species and were dealt separately under the Income Tax Ordinance, 2001---Recovery and collection of "tax due" was dealt under Part IV of Chapter X of the Income Tax Ordinance, 2001 which became due after determination of payable tax after assessment and provisions related to assessments were placed in Part II of Chapter X of the Ordinance---Taxpayer, in the present case, was taxed under the Final Tax Regime and tax was collected at import stage under S. 148 of the Income Tax Ordinance, 2001 which was final tax on the income arising out of import---Instead of filing return under S. 114 of the Income Tax Ordinance, 2001 taxpayer was required to file statement under S.115(4) of the Ordinance; and provisions of S. 169 of the Ordinance, captioned as "tax collected or deducted as final tax" were of pivotal significance under the Final Tax Regime---Construction of S. 169(3) of the Income Tax Ordinance 2001 and the phrase used therein, which was, "an assessment shall be treated to have been made under S. 120" revealed that amount specified under statement filed S. 115(4) of the Ordinance shall be taken as "tax due" and deemed to be taken as an assessment order under S. 120, for all purposes of the Income Tax Ordinance, 2001---High Court observed that amount collected under S. 148(1) of the Income Tax Ordinance, 2001 which was specified in statement filed under S. 115(4) of the Ordinance was to be taken as "tax due" by application of S. 169(3) of the Income Tax Ordinance, 2001---In the present case, controversy was raised under S. 162 of the Income Tax Ordinance, 2001 regarding rate of tax deducted by taxpayer under S.148(1) of the Income Tax Ordinance, 2001 while ignoring the legal position that the same had become "tax due" under the assessment order for the tax year, which could not therefore be altered without amendment of assessment order under S. 122 of the Income Tax Ordinance, 2001---Provisions of Ss. 161 & 162 of the Income Tax Ordinance, 2001 could not have been invoked for recovery of a tax, character of which changed from "advance tax" to "tax due" after assessment vide S. 169(3) of the Income Tax Ordinance, 2001---Reference was answered accordingly.

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

----Ss. 161, 162 & 169(3)---Tax collected and deducted as final tax---Scope and nature of recovery of tax under Ss. 161 & 162 of the Income Tax Ordinance, 2001---Application of S. 169(3) of the Income Tax Ordinance, 2001 to tax deducted as final tax and deemed to be an assessment under S. 120 of the Income Tax Ordinance, 2001---Effect---Provisions of Ss. 161 & 162 of the Income Tax Ordinance, 2001 could not have been invoked for recovery of tax, character of which changed from "advance tax" to "tax due" after assessment vide S. 169(3) of the Income Tax Ordinance, 2001.

Ch. Muhammad Shakeel for Applicant.

Nemo for Respondent.

Date of hearing: 10th November, 2014.

2015 P T D 884

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

IMPERIAL ELECTRIC COMPANY (PVT.) LTD.

PTRs Nos.147, 152, 242, 372, 467, 468, 469, 470, 471, 557, 558, 559, 560, 561, 205, 213, 241, 376, 377, 378, 379, 380, 421, 422 of 2012, decided on 19th November, 2014.

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

----Ss. 113, 169, 120 & 133---Finance Act (I of 2008) S. 18(8)---Reference to High Court---Minimum tax on turnover---Phrase "Turnover from all sources" occurring in S.113, Income Tax Ordinance, 2001---Scope---Final Tax Regime under the Income Tax Ordinance, 2001---Interpretation of S. 113 of the Income Tax Ordinance, 2001 [as it stood before omission by S. 18(8) of the Finance Act, 2008]---Question before the High Court was whether receipts and tax paid under the Final Tax Regime under the Income Tax Ordinance, 2001 could be included in "aggregate turnover from all sources" for charging of minimum tax under S. 113 [as it stood before omission vide S. 18(8) of the Finance Act, 2008] of the Income Tax Ordinance, 2001----Held, that provisions of the Income Tax Ordinance, 2001 when examined under the principle that "statute should be read as a whole" or that "textual interpretation should match the contextual", then while there was no cavil that taxation under Normal Tax Regime and Final Tax Regime were different in nature and mutually exclusive, however it could not be ignored that income charged to tax under the Final Tax Regime in lieu of income tax arrived through the conventional way (through assessment) was an independent source of income and it was also not ignorable that after being taxed under the Final Tax Regime, in an unconventional way, an assessment order was treated as passed under Normal Tax Law---Under S. 169(3) of the Income Tax Ordinance, 2001 a statement filed under S. 115(4) of the Income Tax Ordinance, 2001 was treated as an assessment order under S. 120 of the Income Tax Ordinance, 2001 and source of such income was not found to have been excluded specifically from "turnover from all sources"----Argument that phrase "turnover from all sources" used in S. 113 of the Income Tax Ordinance, 2001 meant only the source of income determined under normal law was misconceived, and had the Legislature intended it to be so, it could have been done by use of clear words---Finality of the Final Tax Regime was not compromised by inclusion of its receipts in "turnover from all sources" because minimum tax was charged under S. 113(2)(2a) of the Income Tax Ordinance, 2001 also through presumption of treating the aggregate of a person's turnover as income---Held further that S. 113 was a charging provision, which did not exclude receipts relating to the Final Tax Regime from "turnover from all sources" in clear words and had Legislature intended to charge minimum tax on final tax regime, it could have been done by clear words---Reference was answered accordingly.

Commissioner of Income Tax/Wealth Tax Companies Zone, Faisalabad v. Messrs Masood Textile Mills Ltd., Faisalabad 2009 PTD 1707; Messrs Elahi Cotton Mills Ltd., and others v. Federation of Pakistan, through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582 = 1997 PTD 1555; Highway Petroleum Service (Regd.), Lahore v. Islamic Republic of Pakistan and another 1977 PTD 183 and Partington v. A.G., (1869) LR 4 HL 100, p.122, referred to in IRC v. Duke of Westminster, (1936) AC 1, P. 24 (HL) rel.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69; The Commissioner of Income Tax, Central Zone 'B', Karachi v. Messrs Asbestos Cement Industries Limited, Karachi 1993 SCMR 1276 and Messrs Rijaz (Pvt.) Ltd., through Chief Executive Riaz A. Gul, Lahore v. The Wealth Tax Officer, Circle III, Lahore and another 1996 PTD 489 distinguished.

(b) Interpretation of statutes---

----Tax statute---Charging provision---Charging provisions were to be interpreted strictly and literally and while construing such provisions, courts were not to be overwhelmed by principles of equity and only those could be charged to tax who were caught by clear words of the charging provisions---If two interpretations of such changing provisions were possible, one favoring the subject was to be embraced---Principles of interpretation in light of case-law, examined.

Highway Petroleum Service (Regd.), Lahore v. Islamic Republic of Pakistan and another (1977) 36 Tax 8 (H.C. Lah.) and Partington v. A.G., (1869) LR 4 HL 100, p.122, referred to in IRC v. Duke of Westminster, (1936) AC 1, P. 24 (HL) rel.

(c) Interpretation of statutes---

----"Amendment" to a statute and "insertion" in a statute---Distinction---Effect---Retrospective application of an amendment or insertion---Scope---Marked difference existed between an "insertion" and an "amendment"---Amendment was made of an existing provision, therefore question of retrospectivity could arise; however an insertion was always of a new provisions, which if created a liability or took away a vested right, could not be applied retrospectively.

Khawaja Farooq Saeed, for Applicants (in PTRs Nos.147, 152, 242, 372, 467, 468, 469, 470, 471, 557, 558, 559, 560 and 561 of 2012).

Amjad Hussain Malik, for Applicants in (PTRs Nos. 205 and 213/2012).

Sajjad Haider Rizvi, for Applicant (in PTR No. 241 of 2012).

Muhammad Asif Hashmi, for Applicants (in PTRs Nos. 376, 377, 378, 379 and 380 of 2012.

Asjad Saeed, for Applicants (in PTRs Nos. 421 and 422 of 2012).

Muhammad Iqbal Hashmi, for Applicant.

Imran Rasool, for Applicant.

Ch. Liaquat Ali, for Applicant.

Mr. Ehsan-ur-Rehman Sheikh, for Applicant.

Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, Lahore.

Shahbaz Butt, for Respondent (in PTR No. 213 of 2012).

Date of hearing: 19th November, 2014.

2015 P T D 911

[Lahore High Court]

Before Ijaz ul Ahsan, J

MCB BANK LTD.

versus

DEPUTY COMMISSIONER INLAND REVENUE and others

Writ Petition No.31284 of 2014, decided on 3rd February, 2015.

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

----Ss. 170 & 171---Constitution of Pakistan, Arts. 4, 23, 24 & 199---Constitutional petition---Interpretation, scope and object of Ss. 170 & 171 of the Income Tax Ordinance, 2001---Refund---Additional payment/ compensation for delayed refunds---Adjustment of compensation amount for delayed payment against advance tax liability of taxpayer---Principles---Petitioner taxpayer impugned adjustment memo. of Federal Board of Revenue, whereby Department sought to adjust the advance tax liability of the taxpayer against the principal amount of refund due to taxpayer under S. 170 of the Income Tax Ordinance, 2001 instead of adjusting the same first against the amount of compensation accrued as payable to the taxpayer for delayed payment of said refund---Held, that instead of making adjustment of compensation due to the petitioner, the Department proceeded to adjust liability against the principal amount and attempted to deprive the petitioner of the right to claim any further compensation for delay in payment of refund which meant that petitioner was no longer entitled to claim any further compensation for delay in payment of compensation amount already due for the said tax year---Sole purpose of S. 171 of the Income Tax Ordinance, 2001 was to induce the Department to pay/adjust the amount of refund expeditiously and promptly by making adjustments against the principal amount as refund, and the Department had made an effort in the present case to avoid its duty to promptly repay/adjust the amount of refund and at the same time indefinitely delayed payment of compensa-tion on which no further compensation was payable---Such modus operandi ex-facie was an attempt to play a fraud on the statute and to deprive the petitioner of an amount which was due to it---Section 171 of Income Tax Ordinance, 2001 provided for payment of compensation to the taxpayer and also cast a duty on the Department to either adjust the refund to reduce tax liability of the taxpayer or pay the refund quickly---Intention of Legislature behind S. 171 of the Income Tax Ordinance, 2001 was that the State could not be allowed to withhold indefinitely what it admitted to as due to the taxpayer by way of a refund---Impugned actions of the Department therefore constituted violation of Constitutional guarantees and amounted to taking away property without due process of the law---Sections 170 & 171 of the Income Tax Ordinance, 2001 had to be read in tandem as they provided a mechanism to ensure that taxpayers are protected against losses that they incur on account of excessive payment of tax and delays in refund of the same---Actions of the Department, in the present case, if allowed, would result in unjust enrichment of the department, since by applying principal amount of refund to reduce advance tax liability of the taxpayer / petitioner, the Department had attempted to absolve itself of its obligation towards making any further compensation for delayed payment of principal amount of refund---Delayed compensation payment already due, by use of such methodology, could be deferred indefinitely by the Department without having to pay any further amount of account of non-payment of delayed payment / adjustment of amount of compensation that had already accrued---Contention of the Department that nothing in S. 170 or 171 of Income Tax Ordinance, 2001 existed to suggest that the department was under an obligation to utilize the amount of compensation first and then adjust the balance against the amount of refund, had no force in view of the clear and obvious intent behind Ss. 170 & 171 of the Income Tax Ordinance, and there was no need to spell out the same by way of specific provisions in the Income Tax Ordinance, 2001---Both amounts were payable by the State to the taxpayer and one attracted obligation to pay compensation with interest, for the period of delay and the other did not; and thus if the State intentionally decided to adjust a taxpayers' liability against an amount for non-payment for which it was required to pay compensation, and did not make such adjustment against an amount for delayed payment on which it did not have to pay any compensation, it could delay payment/adjustment of such compensation indefinitely without any penal consequence, and intention behind such action could not be termed bona fide fair or just---High Court directed the Department to adjust the advance tax liability of the petitioner taxpayer first against the amount of delayed payment of compensation, and make the resultant adjustment in the total amount of refund as well as in the delayed payment compensation payable to the petitioner taxpayer, and further directed the Department to reduce the tax liability by applying the compensation amount till such time it was fully adjusted before utilizing the principal refund amount for adjustment or repayment of the same to the petitioner taxpayer---Constitutional petition was allowed, accordingly.

Sui Northern Gas Pipelines Limited v. Deputy Commissioner Inland Revenue and others 2014 PTD 1939; Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64; Ikram Bari and 524 others v. National Bank of Pakistan through President and another 2005 SCMR 100 and Pakistan Tobacco Company Ltd., and another v. Federation of Pakistan through Secretary, Ministry of Commerce, Islamabad and 3 others 1999 SCMR 382 rel.

(b) Public Functionary---

----Duties of---State functionaries were required to act justly, fairly and transparently.

(c) Interpretation of statutes---

----Taxation statute---Where two interpretations of a taxation provision were possible, the one most beneficial to the taxpayer must be adopted.

(d) Constitution of Pakistan

----Arts. 4, 23 & 24----Economic justice---Unjust enrichment----Unjust enrichment offended the principle of economic justice embodied in the Constitution.

Sui Northern Gas Pipelines Limited v. Deputy Commissioner Inland Revenue and others 2014 PTD 1939; Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64; Ikram Bari and 524 others v. National Bank of Pakistan through President and another 2005 SCMR 100 and Pakistan Tobacco Company Ltd., and another v. Federation of Pakistan through Secretary, Ministry of Commerce, Islamabad and 3 others 1999 SCMR 382 rel.

Mansoor Usman Awan for Petitioner.

Sarfraz Ahmed Cheema for Respondents.

2015 P T D 981

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

KAMRAN AYUB CHUGHTAI

versus

SUPERINTENDENT CUSTOMS and 3 others

Custom Reference Application No.12 of 2012, heard on 1st December, 2014.

Customs Act (IV of 1969)---

----Ss. 156, 187 & 196---Reference to High Court---Registration of vehicle---Lawful import---Proof---Onus---Vehicle in question was detained by authorities on the plea that same was not legally imported---Plea raised by applicant was that vehicle in question was lawfully registered, which was sufficient proof of lawful import---Validity---Valid registration book could be a strong corroborative piece of evidence to support weak documentary evidence of lawful import in absence of any import document primary or secondary whatsoever and lack of any attempt on the part of applicant to secure those import documents from relevant quarters---Registration book alone, could not be treated as prima facie evidence of import and payment of customs duty and taxes to discharge evidentiary burden of proof under Ss.156(2) & 187 of Customs Act, 1969---High Court answered question pertaining to registration book as proof of lawful import of vehicle, in affirmative, while remaining questions did not involve warranting interference of High Court---Reference was disposed of accordingly.

Collector of Customs v. Ghulam Muhammad (Preventive), Karachi 2008 PTD 525; Collector, Customs, Sales Tax and Central Excise, Custom House, Quetta v. Naimtullah 2003 PTD 2118; Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68; Akbar Ali and 4 others v. Ehsan Ellahi PLD 1980 Lah. 145; Government of Pakistan and others v. Maulvi Ahmad Saeed 1983 CLC 414; Sardar Ghulam Nabi Khan v. Azad Government of State of Jammu and Kashmir through Chief Secretary 1984 CLC 325; Barkat Ali and another v. The State and others PLD 1973 Kar. 659; S.M Anwar Sathi v. South British Insurance Co. Limited Karachi PLD 1975 Kar. 458 and Abdur Rauf Khan v. Collector, Central Excise and Land Customs, Peshawar and 3 others 1980 SCMR 114 distinguished.

Muhammad Aijaz v. Director Customs and others 2007 YLR 1071; Hakeen-u-Din and another v. Director General of Intelligence and Investigation (Customs and Excise) and 4 others 2010 PTD 1060; Collector of Customs v. Muhammad Tasleem, Multan 2002 MLD 296 and Agha Masihuddin v. Additional Collector of Customs, Preventive Collectorate, Karachi and 2 others 2009 PTD 523 rel.

Arslan Akhtar for Applicant.

Sarfraz Ahmad Cheema for Respondents.

Date of hearing: 1st December, 2014.

2015 P T D 1030

[Lahore High Court]

Before Ijaz ul Ahsan, J

SONERI BANK LTD. through Authorized Attorneys

versus

FEDERATION OF PAKISTAN through Secretary of Law and 2 others

Writ Petition No.19821 of 2013, decided on 26th December, 2014.

(a) Constitution of Pakistan---

----Art. 73(2)---Term 'incidental'---Object and scope---Term 'incidental' as used in Art. 73(2) of the Constitution widens the scope of sub-clauses (a) to (f) of Art. 73(2) of the Constitution, by providing that any matter connected with or supplementary to any of the matters specified in preceding paragraphs are also deemed to be Money Bill and it is on such basis that Finance Bill regarding rates of taxes also contains provisions relating to machinery for collection, assessment, appeals, revisions etc. are treated as Money Bills because such matters are 'incidental' to imposition of taxes---Bill seeking to amend or consolidate law relating to income tax is treated as Money Bill provided such bill aims at imposition, abolition, remission or regulation of any tax or any matter incidental thereto---Only one section in a bill imposing a tax and several others which may deal with the scope, methodology and manner of its imposition, collection, assessment etc. is a "Money Bill".

Oxford Advanced Learner's Dictionary, 8th Edition; Longman Dictionary of Contemporary English, DVD-ROM; Black's Law Dictionary 9th Edition; The Essential Law Dictionary, Sphinx (R) Publishing, Illinois, 2008 P. 237; Biswas Enclycopedic Law Dictionary, 3rd Edition, 2008, Wadhwa Nagpur, P.799; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402 and Wharton's Law Lexicon, 14th Edition rel.

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

----Ss. 165, Explanation & 165-A---Constitution of Pakistan, Arts.73(2)(a)(g) & 199---Constitutional petition---Amendment, vires of---Plea raised by petitioners was that insertion of Explanation to S. 165 and S. 165-A in Income Tax Ordinance, 2001, through Money Bill were ultra vires the Constitution---Validity---Provisions of S. 165 of Income Tax Ordinance, 2001, related to furnishing of various statements by person collecting or deducting taxes on behalf of government and the statements contained information in respect of persons from whom tax was deducted or collected including amount of payment collected and deposited---Information so collected was utilized by tax authorities in regulation of income tax and other taxes as well---Tax authorities, on the basis of such information, could find out and verify whether or not withholding agent had correctly withheld taxes as per rates prescribed in Income Tax Ordinance, 2001, and had deposited taxes collected by it in government treasury within the prescribed period---Such information was used to monitor withholding agents and thereby regulating collection of taxes through such mechanism and the information could be utilized to see whether or not persons to whom payments had been made correctly declared their receipts and incomes---Provisions of S. 165 of Income Tax Ordinance, 2001, fell within the ambit of words "provisions dealing with the imposition,…… or regulating of any tax" as used in Art. 73(2)(a) of the Constitution---Explanation in question was not a substantive provision, did not and could not add anything to existing section and had been added to explain, facilitate and be utilized as an aid to interpretation of the section---Explanation was added to S. 165 of Income Tax Ordinance, 2001, which already fell within the purview of the language of Art.73(2)(a) and (g) of the Constitution, was also covered by the language of sub-Articles (a) and (g)---Provisions of S. 165-A, of Income Tax Ordinance, 2001, were similar to S. 165 of Income Tax Ordinance, 2001---Amendments in question fell within the purview of Art. 73(2)(a) and (g) of the Constitution, and therefore, intra vires the Constitution---Petition was dismissed in circumstances.

Halsbury's Laws of England, Fourth Edition, Volume 3, Banking, Page 72; 2013 PTD 1459, 2013 PTD 969; 1998 PTD 1804; Legal Terms & Phrases by M. Ilyas Khan 2006 Edition at p. No.447; K.J. Aiyar Judicial Dictionary 16th Edition at p.No.850; Chambers Dictionary 12th Edition at P. No.765; Black's Law Dictionary Fifth Edition; The Australian Oxford Dictionary, Second Editoin; Webster's New World College Dictionary; Malik Asghar and 3 others v. Government of Punjab PLD 2003 Lah. 73; Ch. Muhammad Akram and another v. District Magistrate Multan 1984 PCr.LJ 117; Messrs East and West Steamship Company v. Pakistan PLD 1958 SC (Pak.) 41; Colony Sarhad Textile Mills v. Collector, CE & LC PLD 1969 Lah. 228; Muhammad Hussain Petel v. Habib Wali Muhammad PLD 1981 SC 1; Arshad Akram and Co. v. Divisional Superintendent, Pakistan Railways PLD 1982 Lah. 109; PLD 1968 Lah. 202 (DB); AIR 1939 Lah. 587 (D.B.); Mir Muhammad Idris and others v. Federation of Pakistan through Secretary Ministry of Finance and others PLD 2011 SC 2013 and East Pakistan Chrome Tannery (Pvt.) Ltd. v. Federation of Pakistan and others 2011 PTD 2643 ref.

Syed Ali Zafar for Petitioner.

Muhammad Ilyas Khan for Respondent No.3.

Sarfraz Ahmed Cheema for Respondent.

Muhammad Sohail, Standing Counsel for Pakistan.

Nasar Ahmed, Deputy Attorney General for Pakistan.

Date of hearing: 28th November, 2014.

2015 P T D 1068

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

Messrs AZGARD NINE LTD.

P.T.R. No.501 of 2010, heard on 8th January, 2015.

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

----Ss. 124(2) & 133----Interpretation of S.124(2) of the Income Tax Ordinance, 2001---Assessment giving effect to an order---Period of limitation for making new assessment order under S.124(2) of the Income Tax Ordinance, 2001---Nature scope and object of the limitation period provided in S.124(2) of the Income Tax Ordinance, 2001---Use of the word "shall"---Import---Mandatory nature of limitation prescribed in S.124(2) of the Income Tax Ordinance, 2001---Scope---Question before the High Court was "whether period of limitation prescribed in S.124(2) of the Income Tax Ordinance, 2001 was mandatory or directory"---Held, that reading of S.124(2) of the Income Tax Ordinance, 2001 revealed that where an assessment order was set aside by the Appellant Tribunal and Commissioner was directed to make a new assessment, the same shall be made within one year from the end of the financial year in which the Commissioner was served with the remand order---Use of the word "shall" in S.124(2) of the Income Tax Ordinance, 2001 was not an accidental omission but was a deliberate and conscious insertion by the lawmakers who were aware about the implication of the words "shall" or "may"---Customary usage of the terms "may" and "shall" when they appear in a statute was that word "may" involved a choice and the word "shall" involved an order---In certain situations, when the object of the power vested with an authority was to effectuate a legal right as in the present case, even an enabling word like "may" may become mandatory---Import of the word "shall" in S.124(2) of the Income Tax Ordinance, 2001 was that the Commissioner was bound to make a new assessment order from the end of the financial year when the remand order was served---Obvious rationale behind providing limitation under S.124(2) of the Income Tax Ordinance, 2001 was that as limitation periods were provided for various kinds of assessment orders, therefore, once matter was remanded back for a new assessment, it could not be left open to the authority to pass a fresh assessment order at any time on its sweet will---Section 124(2) was also mandatory for the reason that on one hand it restricted the discretionary powers of the authority to pass new assessment order within prescribed period of time but on the other hand also conferred powers with the authority to pass new assessment order after remand of case, regardless whether limitation prescribed for passing of different assessment orders under various provisions of the Income Tax Ordinance, 2001 had expired or not---High Court observed that the time limit/limitation prescribed under S.124(2) of the Income Tax Ordinance, 2001 was therefore, mandatory in nature---Reference was answered, accordingly.

Fatima Sharif and others's case 2009 SCMR 344 = 2009 PTD 37 ref.

Muhammad Sadiq and others v. University of Sindh and others PLD 1996 SC 182; Dr. Haq Nawaz v. Balochistan Public Service Commissioner and others 1996 CLC 58 and Messrs's VN Lakhani and Company v. M.V. Lakatoi and 2 others PLD 1994 SC 894 rel.

(b) Interpretation of statutes---

----Court, under the rule of "litera legis"; when called upon to interpret any provision of a statute, needed to ascertain the intention of the lawmakers from the words used which may receive their literal, natural and ordinary meaning where such words are not defined in the statue itself.

(c) Interpretation of statutes---

----Statutes prescribing period of limitation---Settled principle of interpretation of statutes that where time was of the essence to do a particular thing, and on the basis whereof a right had been claimed, the said provision(s) would be of a mandatory nature and if no right was claimed, the provisions would be non-mandatory---Where public functionaries were empowered to create a liability against a citizen only within the prescribed time, the said time became mandatory which is all the more so, when the prescribed time limit was beneficial to the citizen and restricted the power of the executive/revenue.

Dr. Haq Nawaz v. Balochistan Public Service Commission and others 1996 CLC 58 rel.

(d) Interpretation of statutes---

----Use of the words "may" or "shall"---Nature of the meanings attributable to words "may" or "shall"---Customary usage of terms of "may" and "shall" when they appear in a statute is that the word "may" involved a choice and the word "shall" involved an order---In certain situations when the object of the power vested with an authority was to effectuate a legal right, even an enabling word like "may" may become mandatory.

Muhammad Sadiq and others v. University of Sindh and others PLD 1996 SC 182 rel.

(e) Public Functionary---

----Duties of---Where public functionaries were empowered to create a liability against a citizen only within the prescribed time, the said time became mandatory which is all the more so, when the prescribed time limit was beneficial to the citizen and restricted the power of the executive/revenue.

(f) Interpretation of statutes---

----Each and every word of a statute had to be given its meaning and no redundancy or superfluity was attributable to an act of Parliament.

Messrs's VN Lakhani and Company v. M.V. Lakatoi and 2 others PLD 1994 SC 894 rel.

(g) Words and phrases---

----"May and "Shall"---Distinction.

Syed Sajjad Haider Rizvi for Applicant.

Shahbaz Butt for Respondent.

Date of hearing: 8th January, 2015.

2015 P T D 1160

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

versus

Messrs ASLAM KHAN MOTOR WORKSHOP

Tax Reference No.43 of 2008, decided on 11th February, 2015.

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

----Ss.132, 131, 2(13), 2(13A) & 209---Appeal before Appellate Tribunal---Jurisdiction of Income Tax Authorities---Filing of appeal by Commissioner was not a mere administrative or ministerial act---Question before High Court was whether an appeal before Appellate Tribunal was rightly held to be not maintainable on the ground that since same was filed by the Commissioner, who earlier, when he was Commissioner (Appeals), had passed the order against which he filed appeal, therefore he could not file appeal against his own order---Contention of the Department was that signing of memorandum of appeal was a mere administrative/ministerial act and Commissioner had no option but to sign the memorandum of appeal against his own order---Held, that collective reading of Ss. 2(13), 209(1) & 209(2) of the Income Tax Ordinance, 2001 made it clear that the Commissioner was not the only authority who could file appeal against his own judgment as Commissioner (Appeals) and he could have asked his immediate superior to assign the power of filing appeal against a particular order to any other officer of Inland Revenue---Section 132 of the Income Tax Ordinance, 2001 recognized the taxpayer and the Commissioner as parties for the purpose of filing of an appeal before the Appellate Tribunal---Act of filing of appeal after taking the decision that the Department was aggrieved from the order; could not be termed as an Administrative or Ministerial act by any stretch of interpretation---Filing of appeal was one of the basic functions of the Commissioner under the Income Tax Ordinance, 2001 therefore, it was not an administrative act---Filing of an appeal against an order required application of mind and exercise of discretion based on personal judgment that department was aggrieved from an order---Under well recognized principles of law, based on fair play, no one could be a judge on his own decision and such principle could not be defeated by changing the caps of designations particularly when a way out was available under the Income Tax Ordinance, 2001 of assigning special jurisdiction to any other officer of Inland Revenue for filing of such appeals---Impugned order was therefore rightly passed---Reference was answered, accordingly.

(b) Words and phrases---

----"Administrative Act"---Meaning---Administrative act is an act made in a management capacity; especially, an act made outside the actor's usual field.

Black's Law Dictionary (Ninth Edition Page 28) rel.

(c) Words and phrases---

----"Ministerial Act", meaning of---An act performed without independent exercise of discretion or judgment.

Black's Law Dictionary (Ninth Edition Page 28) rel.

Syed Khalid Javaid Bukhari and Syed Bahadar Ali, Additional Commissioner Inland Revenue for Applicant.

Mirza Muhammad Waheed Baig for Respondent.

Date of hearing: 11th February, 2015.

2015 P T D 1207

[Lahore High Court]

Before Syed Mansoor Ali Shah and Abid Aziz Sheikh, JJ

WANG XIAOWEI

versus

ASSISTANT COLLECTOR CUSTOMS, FAISALABAD and 6 others

Customs Reference Application No. 109 of 2013, decided on 29th October, 2014.

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

----Ss. 181, 15, 16 & 196---S.R.O 577(I)/2006 dated 5-6-2006---Interpretation of S. 181 of the Customs Act, 1969---Import of vehicle by foreign Embassy---Sale of vehicle by the Embassy---Confiscation of vehicle---Option to pay fine in lieu of confiscated goods---Exercise of discretion by Adjudicating Officer---Scope---Contention of petitioner was that he purchased vehicle from foreign Embassy after three years from date of import, therefore no duties and taxes were leviable on the same per S.R.O 577(I)/2006 dated 5-6-2006---Contention of Department was that said vehicle was sold by the Embassy without obtaining permission from Ministry of Foreign Affairs as required under S.R.O 577(I)/2006 dated 5-6-2006, therefore the same was rightly confiscated---Held, that per plain reading of S. 181 of the Customs Act, 1969, the Adjudicating Officer enjoyed discretion to offer an option to the owner of goods to pay fine in lieu of confiscation of goods---Use of the word "may" in S. 181 of the Customs Act, 1969 could not be read for "shall" but at the same time the concerned officer in absence of compelling reasons, must not withhold the exercise of his discretion for giving an option to owner of goods under S. 181 of the Customs Act, 1969 for redemption of goods in lieu of payment of fine, except in cases in which goods were specifically excluded by the Board----In the present case, vehicle in question was not covered under the goods which were specially excluded and the Department was not claiming that the said vehicle was imported by the Embassy in violation of Ss. 15 or 16 of the Customs Act, 1969---Even though permission from the Ministry under S.R.O. 577(I)/2006 dated 5-6-2006 could not be proved, however, the Department had admitted before the Court that no recovery of revenue was involved in the matter---No doubt that power of Adjudicating Officer to offer option to pay fine in lieu of confiscation under S. 181 of the Customs Act, 1969 was discretionary; however, when law vests a discretion in a public functionary, there was always a corresponding obligation to exercise the same fairly and justly, and where the Authority did not find it appropriate to exercise its discretion, it still had to provide reasons for inaction on its part---Discretion must be exercised to advance the cause of justice in a fair and reasonable manner---Failure to exercise discretionary power under a statute without legal justification was not acceptable---Confiscation of vehicle, in the present case, without giving option of redemption subject to payment of fine under S. 181 of the Customs Act, 1969 was not a reasonable exercise of discretion---High Court directed Adjudicating Officer to give an option to the petitioner under S. 181 of the Customs Act, 1969 to pay fine in lieu of confiscated vehicle---Reference was answered, accordingly.

Abu Bakar Siddique v. Collector of Customs 2006 SCMR 705; Haji Abdul Razzak v. Pakistan through Secretary, Ministry of Finance Islamabad and another PLD 1974 SC 5; Irfan Naseer Baig and another v. Province of Punjab through Secretary, S & GAD and 2 others 2011 PLC (CS) 1537; Raz Muhammad v. Inspector-General Frontier Corps. Balochistan, Quetta and others 1999 MLD 3414; Sherzada v. Collector Customs, Peshawar 2011 PTD 301 and Muhammad Hussain and another v. Province of Sindh through Home Secretary and 4 others 2014 MLD 174 rel.

(b) Administration of justice---

----All judicial, quasi-judicial and administrative authorities while exercising mandatory or discretionary jurisdiction must follow the rule of fair exercise of power in a reasonable and just manner.

(c) Public Functionary---

----Duties of---Exercise of discretion by a public functionary---Principles---When the law vested a discretion in a public functionary, there was always a corresponding obligation to exercise the same fairly, and justly, and where an Authority did not find it appropriate to exercise its discretion, it still had to provide reasons for inaction on its part---Discretion must be exercised to advance the cause of justice in a fair and reasonable manner---Failure to exercise discretionary power under a statute without legal justification was not acceptable.

Abu Bakar Siddique v. Collector of Customs 2006 SCMR 705 rel.

(d) Discretion---

----Exercise of---Principles.

Abu Bakar Siddique v. Collector of Customs 2006 SCMR 705 rel.

Barrister Ahmed Pervaiz for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

Barrister Rizwan Ahmed, Advocate/Assistant Legal Advisor of the Ministry for Respondent.

Date of hearing: 29th October, 2014.

2015 P T D 1236

[Lahore High Court]

Before Ijaz ul Ahsan and Abid Aziz Sheikh, JJ

Messrs INFOTECH (PVT.) LTD.

versus

COLLECTOR OF CUSTOMS and 3 others

Customs Reference No.1 of 2006, heard on 20th March, 2014.

Customs Act (IV of 1969)---

----S.196---Reference to High Court---Question of fact---Scope---Exemption certificate---Importer was aggrieved of order passed by authorities whereby they disallowed benefit of exemption certificate issued by Income Tax Department---Validity---Advisory jurisdiction of High Court under S. 196 of Customs Act, 1969, was clearly distinguishable from its appellate or revisional jurisdiction---Purpose of reference was not to get a decision for or against a party before Tribunal but it was for resolution of a problematic or debatable legal question---Unless there was perversity, the question of fact could not be examined by High Court---Exemption certificate was issued under the impression that importer was a manufacturer---Importer was not engaged in manufacturing process, therefore, on the face of it importer did not fulfil condition of exemption certificate, therefore, Customs authorities had acted lawfully---Order passed by Customs Appellate Tribunal was well reasoned and grounded on correct principle of law relevant to the facts of the case---Reference was dismissed in circumstances.

Commissioner of Income Tax Zone-C, Lahore v. Messrs Margalla Textile Mills Limited, Lahore 2008 PTD 1982 and Messrs Best Buy Computers, Lahore and another v. Director, Intelligence and Investigation (Customs and Excise), Lahore and others 2009 SCMR 19 ref.

Commissioner of Income Tax v. Messrs Multan Fabrics (Pvt.) Ltd. 2013 PTD 2077 rel.

Muhammad Mansha for Petitioner.

Izhar-ul-Haq Sheikh for Respondent No.3.

Mrs. Amna Warsi for Respondent No.1.

Date of hearing: 20th March, 2014.

2015 P T D 1286

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

LAHORE FEEDS LIMITED through General Manager

versus

CUSTOMS SALES TAX AND CENTRAL EXCISE APPELLATE TRIBUNAL and 3 others

Customs References Nos. 23 to 76 of 2006, heard on 23rd February, 2015.

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

----Ss. 25 & 196---Customs Rules, 2001, R. 109---Reference to High Court---Transaction value---Determination---Burden to prove---Grievance of importers was that customs authorities did not rely upon their declarations and resorted to modes to determine transaction value of goods imported by them---Plea raised by importers was that in absence of allegation of under valuation, the authorities should have accepted declared value for the purposes of customs duty---Validity---Customs authorities had power to determine transaction value of imported goods, if customs value of such goods could not be determined under provisions of S. 25(1) of Customs Act, 1969, for any reason---Provisions of S. 25(5) & (6) of Customs Act, 1969, triggered as soon as any doubt had arisen as to correct customs value of imported goods---Once doubts were raised as to truth or accuracy of particulars or of documents produced in support of declaration by importer, the burden to proof shifted to importer---High Court declined to interfere in decision of customs authorities---Reference was dismissed in circumstances.

Rehan Umar v. Collector of Customs, Karachi and 2 others 2006 PTD 909; Constitutional Petition No.2673 of 2009; Muhammad Ashfaq v. Federation of Pakistan and 2 others 2007 PTD 198; Messrs Najam Impex, Lahore through Sole Proprietor v. Assistant Collector of Customs, Karachi and 4 others 2008 PTD 1250 and Karachi Bulk Storage and Terminal (Pvt.) Ltd. v. Controller of Customs (Valuation), Karachi and another 2004 PTD 2592 ref.

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

----S. 25---Transaction value---Determination---Procedure---Firstly, primary method of determining customs value is transaction value; secondly, if transaction value cannot be determined, then secondary methods are to be applied sequentially, in the order set forth in S. 25 of Customs Act, 1969, itself; thirdly, where appropriate officer had reason to doubt truth and accuracy of particulars or of documents produced in support of declaration, such officer may ask importer to provide further documents or other evidence, such is the stage where burden shifts to importer; fourthly, reason to doubt truth and accuracy must be based on evidence and material in hands of customs authorities and mere doubt without more, does not do and fifthly, if evidence is not rebutted adequately by importer, customs authorities may proceed to assess customs value of goods on the basis of secondary method of valuation.

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

----S. 196---Reference to High Court---Non-framing of question of law---Effect---When an issue is not framed as question of law for determination of High Court, in reference application, High Court is not bound to consider and adjudicate upon such question.

Malik Ahsan Mehboob for Applicant.

Syed Tahir Abbas Rizvi for Respondents.

Date of hearing: 23rd February, 2015.

2015 P T D 1330

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

Messrs MEHRAN TRADERS

S.T.Rs. Nos.20, 21 and 24 of 2011, heard on 24th February, 2015.

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

----Ss. 46,45, 8A & 8B---Income Tax Ordinance (XLIX of 2001), Ss. 132 & 133---Appellate Tribunal---Adjudication of appeals---Determination of facts---Duties and obligations of Appellate Tribunal---Matters relating to sales tax refunds---Scope---Appellate Tribunal was the last fact finding forum in the hierarchy of taxation laws and therefore it was bound to discharge its functions diligently---Any opinion on law, by the Appellate Tribunal would lose its credence for consideration by High Court in its advisory jurisdiction if findings of fact arrived at by the Appellate Tribunal were not trustworthy---In case true facts were not ascertainable from available record; Appellate Tribunal was vested with vast powers under S. 132(1) of the Income Tax Ordinance, 2001 to call for any particulars relating to an appeal or cause further enquiry to be made by Commissioner during the appeal proceedings---Under S. 132(3)(c) of the income Tax Ordinance, 2001; Appellate Tribunal could remand a case to the Commissioner or Commissioner (Appeals) for making such an enquiry or taking an action as the Appellate Tribunal may direct---While dealing with matters relating to refund, particularly under the Sales Tax Act, 1990; Appellate Tribunal was required to keep a balance, to ensure issuance of refund to a registered person in accordance with law and protect against fraudulent claims based on fake and flying invoices---Tax which had not been deposited in the national exchequer should not be allowed to be refunded due to a lapse on part of the authorities under a statute and comprehensive mechanism was given in the Sales Tax Act, 1990 both for expeditious issuance of refund and for protecting the national exchequer from any loss---Appellate Tribunal and the tax authorities were required to keep in mind the principle embodied in S.8A of the Sales Tax Act, 1990 which enjoined joint and several liability on registered persons in the supply chain, if a registered person receiving taxable supply from another registered person had reasonable grounds to suspect that some or all of tax payable in respect of the supplies would go unpaid---Rationale behind more than one appellate forum in the taxation laws was to cross-check the exercise of powers by the authorities and ensure proper taxation under the statute.

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

----Ss. 133 & 132---Sales Tax Act (VII of 1990), Ss. 47 & 46---Reference to High Court under S. 47 of the Sales Tax Act, 1990 and S. 133 of the Income Tax Ordinance, 2001---Questions of law---Non-exercise of jurisdiction by Appellate Tribunal was a question of law.

Commissioner of Income-Tax, Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 = 2002 PTD 419 rel.

Agha Muhammad Akmal Khan and Tariq Manzoor Sial along with Syed Bahadar Ali, Additional Commissioner Inland Revenue for Applicant.

Mian Abdul Basit for Respondent.

Date of hearing: 24th February, 2015.

2015 P T D 1356

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

TATA TEXTILE MILLS LTD. through Director

versus

COLLECTOR OF CUSTOMS EXCISE AND SALES TAX, APPELLATE TRIBUNAL, LAHORE and 2 others

Custom Reference Application No.1 of 1996, heard on 9th February, 2015.

Customs Act (IV of 1969)---

----Ss. 79, 80, 81, 98, 108 & 196---Terms 'warehousing' and 'warehoused'---Scope---Dispute of importer with authorities was on the definition of terms 'entered for home consumption' or 'warehousing' and 'warehoused'---Authorities imposed customs duty on the imported goods on the ground that importer failed to remove goods in question within time prescribed under S.98 of Customs Act, 1969---Order-in-original was maintained by Appellate Authority and Appellate Tribunal---Validity---Concepts of 'entered for home consumption' or 'warehousing' and 'warehoused' were in consonance with the scheme of Customs Act, 1969---Owner of imported goods was to make entry of such goods for home consumption or warehousing within fifteen days of arrival of the goods---Such had to be done by prescribed procedures given in Customs Act, 1969---When any dutiable goods entered for warehousing and assessed under S.80 or 81 of Customs Act, 1969, the owner of such goods had to apply for leave to deposit the same in any warehouse appointed or licensed under Customs Act, 1969---Two procedures were different incidents and had different purpose---Reason for enactment of S.108 of Customs Act, 1969, and benefit contained therein was that while the goods had not been cleared or delivered to the owner of the goods and for all practical purposes, were still at the customs port, the same should be in the power and possession of department and its officers---High Court found it fair and equitable to diminish duty leviable thereon in proportion to diminution of their value---High Court answered in affirmative, the question of law raised in reference application and orders of forums below were modified---Reference was allowed accordingly.

Messrs TATA Textile Mills Ltd. through Director v. Assistant Collector (Recovery Officer), Customs Central Excise and Customs, Multan and another PLD 2000 Lah. 286 ref.

Messrs Qurel Cassettes Ltd. through Managing Director, Islamabad v. Additional Secretary, Government of Pakistan, Central Board of Revenue Karachi and 5 others 2004 PTD 315 and Sargodha Jute Mills Ltd. v. Collector and others 2004 PTD 1911 rel.

Salman Akram Raja for Applicant.

Sh. Iazhar ul Haq for Respondent.

Date of hearing: 9th February, 2015.

2015 P T D 1385

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

Messrs NISHAT (CHUNIAN) LTD. through Chief Financial Officer

versus

FEDERAL BOARD OF REVENUE through Secretary and 3 others

I.C.A. No.267 of 2015, decided on 12th March, 2015.

(a) Appeal---

----Scope---Appeal is a creature of a statute and has to be specifically conferred as a right and unless it is so confirmed, the right of appeal cannot be presumed.

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

----Ss. 127, 161 & 205---Law Reforms Ordinance (XII of 1972), S. 3 (2) & (3), proviso---Intra-court appeal---Maintainability---Word "proceedings"---Scope---Notices under Ss.161 & 205 of Income Tax Ordinance, 2001, were issued by authorities and assessees assailed the same before High Court under Constitutional jurisdiction---Single Judge of High Court dismissed petition filed by assessees---Validity---Proceedings commenced with the first step by which machinery of law was put into motion in order to take cognizance of the case and included every step taken towards further progress of a cause in Court or before a Tribunal, where it was pending---"Proceedings" was a comprehensive expression and included all possible steps in action under law from its commencement to execution of judgment---Applying such test, Division Bench of High Court concluded that notices assailed before Single Judge of High Court under Art. 199 of the Constitution, were a step in proceedings and law applicable provided for an appeal against original order, therefore, intra-court appeal under S. 3 of Law Reforms Ordinance, 1972, was not competent---Intra-court appeal was dismissed in circumstances.

Regional Commissioner of Income Tax and others v. M. Yousaf Academy Quick Fill C.N.G. and others PLD 2006 SC 787; Iftikhar Hussain and others v. Government of Pakistan and others PLJ 1996 Lah. 82; 1990 PTD 155; Muhammad Aslam Sukhera and others v. Collector Land Acquisition, Lahore, Improvement Trust, Lahore and another PLD 2005 SC 45; Deputy Commissioner/Administrator, District Council, Attock and another v. Lawrencepur Woollen Textile Mills Ltd. 1999 SCMR 1357; Vice Chancellor/Chairman Admission Board University of Health Science, Lahore v. Breeha Zainab and another 2011 MLD 1652; Lahore Development Authority through its Director General, Lahore and another v. Commissioner Lahore Division Lahore and another 2009 CLC 86 and PLD 1984 SC 344 ref.

(c) Law Reforms Ordinance (XII of 1972)---

----S. 3 (2) & (3) proviso---Object, scope and purpose---High Court by using the tool of purposive interpretation, stated the reasons for limiting the sweep of appeals to arise from petitions under Art. 199 of the Constitution.

Following are the reasons for limiting the sweep of appeals to arise from petitions under Art.199 of the constitution:

(i) Interlocutory proceedings / actions should not be allowed to be challenged as a normal course. It increases burden on judicial resources.

(ii) Constitutional jurisdiction should be used sparingly and not as a matter of routine and the scope of appeal arising therefrom must also be confined by parameters.

(iii) Matters should be permitted to be dealt with by statutory forums and ought not to be short circuited or circumvented by collateral attacks. This would defeat the intention of legislature.

(iv) A person cannot be conferred benefit of two appeals during the course of same proceedings; one arising out of original order and the other arising out of Law Reforms Ordinance, 1972.

Shehbaz Butt for Appellants.

2015 P T D 1520

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

PAKISTAN CHIPBOARD (PVT.) LTD. through Chief Executive Officer

versus

FEDERATION OF PAKISTAN through Revenue Division and 5 others

Writ Petition No.4532 of 2009, decided on 14th April, 2015.

Sales Tax Act (VII of 1990)---

----S.40---Constitution of Pakistan, Art.199---Constitutional petition---Search and seizure conducted by Sales Tax Authorities under S.40 of the Sales Tax Act, 1990---Non-compliance with requirements of S.40 of the Act---Effect---Petitioner impugned warrant for the search of its premises as well as the subsequent confiscation of material from its premises on the ground that such search and seizure was conducted without a proper warrant and without fulfilling requirements of S.40 of the Sales Tax Act, 1990---Held, that basic requirement of S.40 of the Sales Tax Act, 1990 was that an officer of Inland Revenue must have reasons to believe that a search was necessary to obtain document or things relevant in pending proceedings---Department, in the present case, relied upon letters issued by Collector of Sales Tax to show that department had reason to believe that search was necessary and the letter relied upon by the Department did not satisfy conditions of S.40 of the Sales Tax Act, 1990 and admittedly at that time there were no proceedings pending against the petitioner---No order was on record, explaining and detailing as to what documents were required from the petitioner for which a search under S.40 was necessary---Letters on basis of which search warrant was obtained suggested that the Department was still in the inquiry phase trying to ascertain whether or not the petitioner was an evader of sales tax---Section 40 of the Sales Tax Act, 1990 could only be invoked when there were proceedings pending under the Sales Tax Act, 1990 for which a document or other material was necessary---Search warrant was set aside and the Department was directed to return all records, documents and computers to the petitioner---Constitutional petition was allowed, accordingly.

Chairman Central Board of Revenue and others v. Messrs Haq Cotton Mills (Pvt.) Ltd. Burewala 2007 SCMR 1039 and Collector of Sales Tax and others v. Messrs Food Consultants (Pvt.) Ltd. and another 2007 PTD 2356 rel.

Hasham Ahmad Khan for Petitioner.

Ms. Amna Warsi for Respondents.

Date of hearing: 24th February, 2015.

2015 P T D 1653

[Lahore]

Before Mrs. Ayesha A. Malik, J

NOOR SUGAR MILLS LTD.

versus

FEDERATION OF PAKISTAN and others

W.P. No.28035 of 2014, decided on 2nd April, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S. 161---Income Tax Rules, 2002, R.44(4)---Constitution of Pakistan, Art.199---Constitutional petition---Notice, issuance of---Authorities issued notices to assessees calling upon them to furnish reconciliation statements along with evidence of deduction and payment of tax whenever such deductions or collections were made---Validity---Notices issued under Rule 44(4) of Income Tax Rules, 2002, simply called for certain information---No finding or ruling was rendered against assessees meaning that there was no adverse order issued against them---For the cases pursued under S. 161 of Income Tax Ordinance, 2001, read with Rule 44(4) of Income Tax Rules, 2002, no determination was made and matter was still pending---All accounting objections or otherwise could be made at the time when case would be heard---Notices in question were issued in accordance with law under Rule 44(4) of Income Tax Rules, 2002---Mere filing of monthly statements did not absolve assessees from their obligation to reconcile their statements with respect to withholding tax deducted or collected---Assessees were performing their duties as withholding agents of government and authorities were well within their statutory right to reconcile information provided by assessees for the purposes of withholding tax---Petition was dismissed in circumstances.

Deputy Commissioner of Income Tax/Wealth Tax, Faisalabad and others v. Messrs Punjab Beverage Company (Pvt.) Ltd., 2007 PTD 1347 rel.

Presence of Petitioners' counsels as in Schedule-A appended with this judgment.

Muhammad Zikria Sheikh, DAG for Respondent.

Nasar Ahmad, DAG along with Dr. Ishtiaq Ahmad, Additional Commissioner (Inland Revenue) for Respondent.

Muhammad Ilyas Khan, for Respondents (in W.Ps. Nos.30264, 34450, 34515, 34530, 30665, 32697, 33084, 33170, 33337, 33874 and 8815 of 2014, W.Ps. Nos. 88, 115, 180, 182, 302, 322, 419, 499, 1406, 2578, 2653, 3282, 3304, 3305, 3510, 4852 and 5622 of 2015).

Liaquat Ali Chaudhry for Respondent, CIR (in W.Ps. Nos.32214, 32404 of 2014 and W.P. No.1406/2015)

Sarfraz Ahmad Cheema for the Respondents (in W.Ps. Nos.34474, 31079, 31223, 31608, 31900, 32821, 33338, 33532 and 33569 of 2014 and W.P. No. 2648/2015).

Muhammad Yahya Johar for Respondent FBR (In W.P. No.31786/14).

Ibrar Ahmad for Respondent FBR (in W.P. No.28035/2014).

Shahid Sarwar Chahil for Respondent CIR, FBR (in W.Ps. Nos.33570, 33571, 33617 and 33874 of 2014 and W.Ps. Nos.114, 321 and 322 of 2015).

Date of hearing: 5th March, 2015.

2015 P T D 1665

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

HASEEB WAQAS SUGAR MILLS LTD.

versus

GOVERNMENT OF PAKISTAN and others

S.T.R. No.14 of 2008, decided on 12th February, 2015.

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

----S. 47---Interpretation of S.47 of the Sales Tax Act, 1990---Reference to High Court---Adjudication of reference application under S.47 of the Sales Tax Act, 1990---Scope---Nature and scope of jurisdiction of High Court under S. 47 of the Sales Tax Act, 1990---Bar to adjudicate under S. 47 of the Sales Tax Act, 1990 on questions of law not raised before Appellate Tribunal---Powers of High Court under S. 47 of the Sales Tax Act, 1990 were circumscribed by the conditions laid down by S. 47 itself, and therefore High Court while adjudicating on reference applications could not travel beyond scope of S. 47 of the Sales Tax Act, 1990---Crucial words used in S. 47 which determined the ambit of power conferred on High Court were "subject to any question of law arising out of such order", therefore two conditions had been laid down for interference by the High Court; firstly; reference application had to state a question of law, and secondly, that question of law must arise out of order of Appellate Tribunal---Question of law, therefore, if the same did not arise out of order of Appellate Tribunal, jurisdiction of High Court would not be attracted and interference under S. 47 of the Sales Tax Act, 1990 would not be called for----Question was not merely of jurisdiction to be vested in the High Court but of certain jurisdictional facts to exist in order for High Court to exercise power under S. 47 of the Sales Tax Act, 1990 and such jurisdictional facts could only exist if the question of law sought to be raised arose out of order of Appellate Tribunal---Nature of jurisdiction under S. 47 of the Sales Tax Act, 1990 was a special jurisdiction and such jurisdiction was limited by the para meters given in the provision itself---High Court under S. 47 of the Sales Tax Act, 1990 therefore could not adjudicate upon any question of law raised for the first time before it.

S.T.R. No.11/2009; Caltex Oil (Pakistan) Ltd. v. Collector, Central Excise and Sales Tax and others 2005 PTD 480; Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489; Messrs F.M.Y Industries Ltd. v. Deputy Commissioner Income Tax and another 2014 SCMR 907; Director Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali 2010 PTD 1024; Brothers Steel Mills Ltd. v. Ilyas Miraj PLD 1996 SC 543, 562; Tristar Polyster v. City Bank 2001 SCMR 410 and Pakistan Industrial Creidt and Investment Corporation v. Government of Pakistan 2002 CLD 1 rel.

(b) Jurisdiction---

----Jurisdiction could not be enlarged or extended beyond the scope of the law, which conferred such jurisdiction---Before a Court could claim to exercise judicial power, it must have jurisdiction, for jurisdiction was the authority of a court to hear a case and hence exercise a judicial power.

Craig R. Ducat and Harold W. Chase, 5th ed. P.5) rel.

Nauman Mushtaq Awan for Applicant.

Sheikh Izhar ul Haq (in S.T.Rs. Nos.14 of 2008 and 127 of 2007), Ms. Kausar Parveen (in S.T.R. No.185 of 2011) and Sarfraz Ahmad Cheema (in S.T.Rs. Nos.21 of 2009 and 116 of 2007) for Respondents.

Date of hearing: 12th February, 2015.

2015 P T D 1714

[Lahore High Court]

Before Ali Akbar Qureshi, J

DISTRICT HEADMASTERS/PRINCIPALS ASSOCIATION DISTRICT MULTAN through President

versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance, Islamabad and 3 others

W.P. No.296 of 2014, decided on 14th January, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12, 13, 14 & Second Sched. Part I---Income Tax Rules, 2001, Rr.2 - 7---FBR Circular No.3 of 2006, dated 11-7-2006---FBR Circular No.6 of 2013, dated 19-7-2013---Constitution of Pakistan, Art.199---Constitutional petition---Grant of tax rebate in income tax on salary---Tax rebate extended to teaching facility and exclusion of certain staff from getting said rebate---Department through Circular No.3 of 2006, dated 11-7-2006, extended a favour to the members of the teaching faculty by giving 50% to 75% tax rebate in its income from salary---Department later on through Circular No.6 of 2013, dated 19-7-2013, made amendment in Second Sched. of Income Tax Ordinance, 2001, and reduced the rebate from 75% to 40%; and excluded the teaching staff performing any administrative or managerial job for such rebate---Department also issued a clarification of additional 50% tax reduction in the case of full time teachers---Concession given by department in payment of income tax on salary, had already been acted upon, and the petitioner (Association of Principals and Headmasters) and others were practising the same---Held, department under the principle of locus poenitentiae, could not withdraw the concession the same by any clarification, and without giving any right of hearing to the beneficiaries---Right accrued in favour of the Association (petitioner), could not in any way be taken away or withdraw, when the department could not refer any plausible explanation or rebuttal to the contention or claim agitated by the Association.

Arif Hussain Dar v. Board of Revenue through Secretary, Muzaffarabad and 5 others PLD 2002 Azad J&K 14; Aziz Ahmad v. Provincial Police Officer (I.-G.P.) Punjab Lahore and 6 others PLD 2005 Lah. 185; Muhammad Nadeem Arif and others v. Inspector-General of Police, Punjab, Lahore and others 2011 SCMR 408 and Sub. Muhammad Asghar v. Safia Begum and others PLD 1976 SC 435 rel.

Raja Naveed Azam for Petitioner.

Agha Muhammad Akmal Khan for Respondents.

2015 P T D 1771

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

Sheikh MANZOOR AHMAD

PTR No.15 of 2012, decided on 6th January, 2015.

Income Tax Ordinance (XLIX of 2001) ---

----Ss. 122, 120, 114, 176 & 133 ---Amendment of assessment---Complete return filed under S. 114 of the Income Tax Ordinance, 2001 to be taken as an "assessment order"---Effect---Return filed by taxpayer for the year 2009 attained status of assessment order under S.120 of the Income Tax Ordinance, 2001 and thereafter on information in terms of S. 176 of the Income Tax Ordinance, 2001 regarding purchase of vehicle by taxpayer; notice for amendment of assessment under S. 122(9) of the Income Tax Ordinance, 2001 was issued to taxpayer and taxpayer explained source of funds for purchase of vehicle as savings over the years---Department, however, contended that household expenses claimed for years 2004 to 2008; were wrongly claimed which resulted into savings for purchase of vehicle and disallowed the same and made addition into income for the said years---Appellate Tribunal annulled said amendment by the Department inter alia on the ground that such addition to household expenses was wrongly made by the Department---Held, that Department had travelled beyond its jurisdiction and overlooked the legal position that household expenses relating to tax years 2004 to 2008 were part of respective assessment orders under S. 120 of the Income Tax Ordinance, 2001 as returns filed under S. 114 of the Income Tax Ordinance, 2001 on the day when the complete return was furnished, for all purposes of the Income Tax Ordinance, 2001 was taken to be an assessment order---Admittedly, independent notices were not issued for amendment of assessment orders under S. 120 relating to tax years 2004 to 2008 and the Department during proceedings for amendment of assessment order for the year 2009 formed opinion that household expenses claimed in the years 2004 to 2008 were not allowable and the same were disallowed, while making amendment to assessment for tax year 2009 and the same was done with blatant disregard to the provisions of law and sanctity attached to assessment orders, which were to be treated to have been issued under S. 120 of the Income Tax Ordinance, 2001---Amendments to assessments under S. 122 of the Income Tax Ordinance, 2001 could only be made on grounds/reasons mentioned in Ss. 122(5) and 122(5A) of the Ordinance, and in the present case, when source of purchase of vehicle was explained as savings over the years, the Department, stepped beyond its jurisdiction and lost sight of the only issue confronted in the show-cause notice---Right course for Department was to issue independent notices under S.122 of the Income Tax Ordinance, 2001 proposing amendment to assessment orders relating to tax years 2004 to 2008---Taxpayer was not confronted in the show-cause notice for addition of household expenses for which no definite information was available at the time of initiation of proceedings under S. 122 of the Income Tax Ordinance, 2001---Amendment of assessment of taxpayer was rightly annulled by Appellate Tribunal---Reference was answered, accordingly.

Independent Newspapers Corporation (Pvt.) Ltd. and another v. Chairman, Fourth Wage Board and Implementation Tribunal for Newspaper Employees, Government of Pakistan, Islamabad and 2 others 1993 SCMR 1533 and Commissioner of Income Tax Companies No.1, Karachi v. Messrs Hassan Associates (Pvt.) Ltd., Karachi 1994 SCMR 1321 = 1994 PTD 1256 rel.

Ch. Zakir Hussain for Appellant.

Nemo for Respondent.

Date of hearing: 6th January, 2015.

2015 P T D 1815

[Lahore High Court]

Before Shahid Jamil Khan and Sardar Muhammad Sarfraz Dogar, JJ

Mrs. AMINA NAEEM

versus

COMMISSIONER OF INCOME TAX

C.T.R. No.21 of 2005, decided on 30th June, 2015.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(aa) & 66A---Un-explained investments, etc., deemed to be income---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order under S. 66A of the Income Tax Ordinance, 1979---Tax on unexplained investment in property---Relevant value of property for purposes of income tax under S. 13 of the Income Tax Ordinance, 1979---Reference to High Court---Question before High Court was whether assessment order against the taxpayer, whereby S. 66A of the Income Tax Ordinance, 1979 was invoked to assess tax on the property of taxpayer in terms of declared value on wealth tax return; instead of value on date of purchase of property, was valid---Contention of taxpayer was that for the purpose of tax under S.13(1)(aa) of the Income Tax Ordinance, 1979; the value of the property on the date of investment was relevant and not the market value shown, as of the valuation date, on the wealth tax return; therefore the said assessment order was misconceived---Held, that in the wealth tax return value of property, on valuation date, was disclosed, whereas for the purpose of charging of tax under S.13(1)(aa) of the Income Tax Ordinance, 1979; the investment made in the purchase of property was relevant and there was no apparent error on record in declaring different values of property in the wealth tax return vis-a-vis income tax return---Reference was answered in favour of the applicant taxpayer, accordingly.

Mian Ashiq Hussain for Applicant.

Malik Asad, Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU, Lahore for Respondent.

2015 P T D 1823

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

COMMISSIONER INLAND REVENUE

versus

MUHAMMAD SHAFIQUE

P.T.R. No.291 of 2012, heard on 9th March, 2015.

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

----Ss. 111 & 133---Unexplained income or assets---Interpretation of S.111(2) of the Income Tax Ordinance, 2001 as it stood prior to its amendment by the Finance Act, 2010-----Word "discovered", meaning and connotation in terms of S. 111(2) of the Income Tax Ordinance, 2001 as it stood prior to its amendment by the Finance Act, 2010---Distinction between "discovery" and "opinion" in context of S. 111(2) of the Income Tax Ordinance, 2001---Procedure to be adopted under S.111 of the Income Tax Ordinance, 2001---Scope---Question before the High Court related to the meaning and impact of the word "discovered" used in S. 111(2) of the Income Tax Ordinance, 2001 and its distinction from the word "opinion" used in the same section---Held, that it was fallacious to use the term "opinion" and "discovery" interchangeably and without distinction or without regard to the intention of the Legislature to have used these words in different context in S. 111 of the Income Tax Ordinance, 2001---Perusal of the word "discovery" would lead to the ineluctable conclusion that the term signifies a stage prior to the formation of an opinion and conclusion by an authority and was an act or process of finding or learning about something that was previously unknown and which led to the formation of an opinion and was not an opinion itself; and referred to the pretrial stage of any proceedings and assistance in the administration of the process which culminated into a finding or conclusion---In broader and general sense, the term "discovered" referred to getting knowledge of anything which not known to the discoverer and which already existed but was not perceived or known and it was therefore, a step in the formation of an opinion and should not be confused with the actual formation of an opinion----Section 111 of the Income Tax Ordinance, 2001 had three distinct and clearly defined stages---First stage related to information, second stage related to discovery and the third stage was the formation of the opinion by the Commissioner---Although it was not clearly mentioned that notice should be served upon the person/ taxpayer in terms of S.111 of the Income Tax Ordinance, 2001 yet the same could be culled from the reading of the provision---Section 111(1) of the Income Tax Ordinance, 2001 related to the part where information came to the knowledge of the Commissioner as the first step and then came the stage of discovery by the Commissioner relating to the amount referred to in S.111(1) of the Income Tax Ordinance, 2001---Such discovery could only be on basis of tangible evidence and material which came in hands of the Commissioner and on the basis of which a notice seeking an explanation form the person shall be issued---Words "the person offered no explanation or the explanation offered by the person was not in the Commissioner's opinion satisfactory" showed that for an explanation to be offered by the person, he must have been issued a show-cause notice by the Commissioner as without a show-cause notice there could be no explanation offered by the person and therefore, a show-cause notice was envisaged by S.111 of the Income Tax Ordinance, 2001---High Court observed that show-cause notice would be the stage which would be deemed to be within the meeting of the term "discovered by the Commissioner" and the said notice must be based on information and belief of the Commissioner that the case was one which fell under the heads specified in S.111(1) of the Income Tax Ordinance, 2001---High Court further observed that "discovery" was an intermediate stage between the Commissioner getting the information and forming an opinion and that in the context of limitation, the point when it was "discovered" by the Commissioner became terminus a quo for the period of limitation in respect of various provisions of the Income Tax Ordinance, 2001 since issuance of show-cause notice under S.111 of the Income Tax Ordinance, 2001 was the point when it would be deemed to have been discovered by the Commissioner---Reference was answered, accordingly.

Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; Black's Law Dictionary Ninth Edition; American Jurisprudence Second Edition Vol.23; Corpus Juris Secundum Vol. Twenty Seven; Words and Phrases Vol.12A; A.N. Lakshman Shenoy v. Income-Tax Officer, Ernakulam, and another (1958) 34 ITR 275; (Stroud's Judicial Dictionary of Words and Phrases) Sixth Edition Vol. 2; KJ Aiyar Judicial Dictionary 16th Edition and Mian Muhammad Nawaz Sharif v. Federation of Pakistan and others PLD 1993 SC 473 rel.

(b) Words and phrases----

----"Discovery"---Meaning---Meanings ascribed to the word "discovery" in various dictionaries and treatise stated.

Black's Law Dictionary Ninth Edition; American Jurisprudence Second Edition Vol. 23; Corpus Juris Secundum Vol. Twenty Seven and Words and Phrases Vol. 12A rel.

(c) Words and phrases---

----"Opinion"---Meaning---Meanings ascribed to the word "opinion" in various dictionaries stated.

(Stroud's Judicial Dictionary of Words and Phrases) Sixth Edition, Vol.2; Black's Law Dictionary Ninth Edition and KJ Aiyar Judicial Dictionary 16th Edition rel.

(d) Words and phrases----

----"Discovery"---"Opinion"---Distinction---Legal distinction between the terms "discovery" and "opinion"---Perusal of the word "discovery" would lead to the ineluctable conclusion that the term signifies a stage prior to the formation of an opinion and conclusion by an authority and was an act or process of finding or learning about something that was previously unknown and which led to the formation of an opinion and was not an opinion itself; and referred to the pre-trial stage of any proceedings and assistance in the administration of the process which culminated into a finding or conclusion---In broader and general sense, the term "discovered" referred to getting knowledge of anything which not known to the discoverer and which already existed but was not perceived or known and it was therefore, a step in the formation of an opinion and should not be confused with the actual formation of an opinion---Term "opinion" was more akin to a decision or a judgment and it was a definite conclusion drawn by an authority based on cogency and rationality and formation of an opinion concluded the matter in the hands of that authority and nothing more was required to be done.

A.N. Lakshman Shenoy v. Income-Tax Officer, Ernakulam and another (1958) 34 ITR 275; (Stroud's Judicial Dictionary of Words and Phrases) Sixth Edition Vol.2; Black's Law Dictionary Ninth Edition; KJ Aiyar Judicial Dictionary 16th Edition and Mian Muhammad Nawaz Sharif v. Federation of Pakistan and others PLD 1993 SC 473 rel.

Raja Sikandar Khan Khadim Hussain Zahid, Saeed-ur-Rehman Dogar, Imran Rasool and Ch. Muhammad Shakil for Applicant.

Shehbaz Butt, Muhammad Tahir Butt Saleh, Abdul Ghafoor Khokhar, Faisal Ghaffor Khokhar and Syed Abid Raza Kazmi for Respondent.

Date of hearing: 9th March, 2015.

2015 P T D 1855

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

Mst. SHAGUFTA ABDULLAH

versus

COMMISSIONER INLAND REVENUE and 3 others

W.P. No.13030 of 2015, heard on 14th May, 2015.

(a) Words and phrases---

----"Hardship"---Defined.

Black's Law Dictionary by Bryan A., Garner, Ninth Edition and Oxford Advanced Learner's Dictionary of Current English by A.S. Hornby, Eighth Edition rel.

(b) Words and phrases---

----"Undue"---Meaning---Undue is something greater or more extreme than is wanted, expected or thought to be reasonable.

Prestige Lights Ltd. v. Custom, Excise and Service Tax Appellate Tribunal (Uttaranchal) (D.B.) 2004 (2) U.D. 265 rel.

(c) Interpretation of statutes---

----Taxing statute---Scope---Taxing statute is to be construed literately in sense in which it has been provided---Intent of Legislature should be clear from words in the legislation---Court must look squarely at words of statute and interpret them in the light of what has been clearly expressed---If there is any ambiguity caused by language, the benefit of that ambiguity goes to taxpayer.

Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others PLD 1991 SC 329 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582 rel.

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

----Ss. 128 & 131(5)---'Undue hardship'---Proof---Taxpayer must show its absolute inability to pay tax and must establish that under existing financial circumstances his income and expenses do not allow to pay required tax---Not about inability to pay tax or inconvenience to pay the tax nor is it about commercial viability or profit making; it is a financial disability to pay tax making it virtually impossible for taxpayer to pay tax---Taxpayer must plead "undue hardship" based on its income and expenses so that it can be evaluated---"Undue hardship" can also include situations where taxpayer is able to show a strong prima facie case.

Messrs L.G. Electronics India (Pvt.) Ltd. v. Commissioner of Central Excise Nodia (Allahabad) 2009 (6) ADJ 246 rel.

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

----Ss. 11(2) & 33(13)---Income Tax Ordinance (XLIX of 2001), Ss.128 & 131(5)---Constitution of Pakistan, Art.199---Constitutional petition---Conditional stay---Undue hardship, non-pleading of---Assessee was aggrieved of order passed by Income Tax Appellate Tribunal granting stay with a condition to deposit 30% of disputed tax---Validity---Grant of stay as per Income Tax Ordinance, 2001, was not granted as of right---Stay was subject to discretion of appellate forum when considering undue hardship---Deposit of 30% of disputed tax as a precondition to stop recovery of assessed tax fell within the discretion of Income Tax Appellate Tribunal---Tribunal had given taxpayer a concession by requiring him deposit a small part of disputed tax and not entire tax because he did not plead undue hardship but emphasized on irreparable loss caused to him---Under S.131 of Income Tax Ordinance, 2001, purpose of providing one hundred and eighty days stay from recovery of tax was to ensure that appeal would be decided in a timely manner thereby ensuring that revenue was paid at the earliest---High Court declined to interfere in condition imposed by Income Tax Appellate Tribunal while granting conditional stay order---Petition was dismissed in circumstances.

Z.N. Exports (Pvt.) Ltd. v. Collector of Sales Tax 2003 PTD 1746; Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Muhammad Asif Nawaz v. Additional Sessions Judge/Justice of Peace Multan and 2 others 2014 CLD 45; Messrs Askari Leasing Ltd. through Chief Manager v. Presiding Officer and another 2015 CLD 196; Pakistan Mobile Communication Ltd. v. Judge District Consumer Court, Gujranwala and 3 others PLD 2015 Lah. 204; Balochistan Glass Limited through Authorized Representative and 2 others v. Bank Alfalah Limited and 2 others 2015 CLD 52 and Mahmood Barni v. Inspecting, Additional Commissioner of Income Tax, Gujranwala and another 2005 PTD 165 ref.

Mirza Bilal Zafar for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

Date of hearing: 14th May, 2015.

2015 P T D 1913

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

Messrs CHICAGO METAL WORKS

Tax References Nos.48, 49 of 2011 and 26 to 41 of 2009, heard on 9th February, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 170 & 171---Refund, payment of---Procedure---Dispute was with regard to payment of additional refund---Validity---Word 'may' as used in S. 171(1) of Income Tax Ordinance, 2001, did not make filing of application for refund as optional---Word 'may' was used for applying to Commissioner for refund within two years---Option to apply for refund in two years was given for the reason that taxpayer could also opt for adjustment of refund against his future tax liability or for adjustment against demand under other taxing statutes---Word 'shall' as used in S. 171(2) of Income Tax Ordinance, 2001, not only made filing of application for refund as mandatory but application had to be in the manner and in the form as prescribed by Rules---Commissioner under S. 171(3) of Income Tax Ordinance, 2001, was to satisfy himself that tax was overpaid and he was obliged to reduce payable refund by adjusting tax payable under Income Tax Ordinance, 2001, and under other statutes---High Court declined to agree with interpretation given by Appellate Tribunal Inland Revenue and questions of law were decided in negative in favour of authorities---Reference was allowed in circumstances.

Fecto Belarus Tractor Ltd. v. Government of Pakistan through Finance Economic Affairs and others PLD 2005 SC 605 ref.

Agha Muhammad Akmal Khan for Applicants (in T.Rs. Nos. 48 and 49 of 2011).

Syed Khalid Javaid Bukhari for Applicants (in T.Rs. Nos. 26 to 41 of 2009).

Mian Abdul Basit for Respondents (in T.Rs. Nos. 48 and 49 of 2011).

Date of hearing: 9th February, 2015.

2015 P T D 1945

[Lahore High Court]

Before Syed Mansoor Ali Shah and Mrs. Ayesha A. Malik, JJ

FLYING CEMENT COMPANY

Versus

FEDERATION OF PAKISTAN and others

I.C.A. No.1068 of 2014, decided on 29th May, 2015.

(a) Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997).--

----Ss. 7(3), 12(b) & 31(4) & (5)---National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998, R.- 17(3)---Law Reforms Ordinance (XII of 1972), S. 3---Intra-court appeal---Determination of electricity tariff---Exclusive function/domain of NEPRA---Scope---Contention of Federal Government was that although tariff of electricity was determined by NEPRA, but it was finalized by the Federal Government under the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997---Validity--­Under S.7(3) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, NEPRA had the power to determine tariff, rates, charges and other terms and conditions for supply of electric power services by the generation, transmission and distribution companies and recommend the same to the Federal Government for notification---Determination or modification of tariff was one of the core functions of NEPRA, and it could not delegate such power---Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, and the National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998, did not contemplate any role of the Federal Government in the determination process---Actual determination of tariff laid exclusively with NEPRA, meaning that if any party including the Federal Government desired any change or modification in the tariff, which could include reasons related to the prudency of costs, it would have to file a petition before NEPRA Tariff could only be determined and modified by NEPRA---Once the tariff was determined (by NEPRA) it had to be notified by the Government---Section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 being a specific section regarding tariff, casted an obligation on the Federal Government to notify the tariff upon intimation by NEPRA---Any interpretation to the effect that NEPRA (only) recommended the tariff determined by it to the Federal Government for re-examination and review, was not only opposed to the provisions off' the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, it also debilitated and enfeebled the role and purpose of NERPA, which was an autonomous and independent regulator under the said Act---Intra-Court appeal was allowed accordingly.

(b) Words and phrases---

----"Surcharge"---Meaning.

The Free Dictionary by Farlex ref.

(c) Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997)---

----S. 31(5)---National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998, R.17(3)---Constitution of Pakistan, Arts. 9 & 24(1)---Law Reforms Ordinance (XII of 1972), S.3 ---Intra-court appeal---Electricity tariff---Equalization surcharge---Debt Servicing Surcharge---Universal Obligation Fund Surcharge--­Neelum Jhelum Surcharge---Surcharges levied on electricity tariff by the Federal Government---Legality and Constitutionality-Involuntary extraction of money from consumers---Contention of Federal Government was that the necessity to impose the surcharges in question was that they represented the cost of the system i.e., the cost of transmission, generation and distribution of electric power consumed, and included capital and development costs for future projects to produce electricity; that the Federal Government was not raising any revenue by levying surcharges but was in fact simply recovering the cost of electricity to ensure economic and efficient generation, transmission and distribution of electricity; that surcharges (costs), over and above the tariff determined by NEPRA were constitutionally permissible and could be imposed by the Federal Government--­Validity---Surcharge was an additional or extra charge on the original charge---Surcharge was supposed to be an add on or additional charge built on an existing charge---Federal Government had argued that all four surcharges (i.e. Equalization surcharge, Debt Servicing Surcharge, Universal Obligation Fund Surcharge and Neelum Jhelum Surcharge) were actually costs of the system, which were not included in the tariff determined by NEPRA---In order for such costs to qualify as a surcharge, there must first exist the original cost to which these surcharges owed their existence to---Impugned surcharges did not rest on an existing charge--- NEPRA has opined that the surcharges in question did not rest on any original cost which is or was under consideration by NEPRA---NEPRA had categorically stated that it had not allowed these costs to be included in the tariff as they did not satisfy the prudency test nor were they directly related to the costs incurred for producing, transmitting or distributing electricity--- Surcharges in question represented costs which were otherwise not included or even considered in the tariff determined by NEPRA, therefore, the impugned surcharges levied by the Federal Government, even though packaged as costs of the system did not figure in the tariff determined by NEPRA---Surcharges in question were, therefore, at best an involuntary extraction of money from the consumers of electricity, labelled as costs of the system or the distribution companies by the Federal. Government---Federal Government levied surcharges in question at its own discretion with no accountability and disclosure of the amounts collected---No prescribed process was laid down under which money collected from consumers was allocated to the power producers---Mode and manner in which the money collected under the impugned surcharges was routed through different accounts maintained by different Government institutions, was not only unconstitutional but also exhibited poor financial governance and discipline, which amounted to playing a fraud on the people---Such extraction of money in the garb of surcharges from the ordinary consumer of electricity was, therefore, violative of the fundamental right to life and property of the consumers---Impugned surcharges, also had no element of quid pro quo, therefore, they could not be labelled as fees---High Court declared the impugned surcharges namely; Equalization surcharge, Debt Servicing Surcharge, Universal Obligation Fund Surcharge and Neelum Jhelum Surcharge levied from time to time through impugned notifications, as unconstitutional and hence set aside the same---High Court directed the Federal Government to refund the amount of surcharges illegally extracted from the consumers---Intra-court appeal was allowed accordingly.

Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641; Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others PLD 1991 SC 329; The Treasurer of Charitable Endowments for Pakistan v.. Central Board of Revenue and 2 others 1986 MLD 1731; Sheikh Nadeem Younas, Chief Executive, Noble Textile Mills, Pattoki, District Kasur v. WAPDA through Chairman WAPDA, WAPDA House, Lahore and 4 others 1996 CLC 1090 ref.

(d) Taxation---

----"Tax and fee"---Distinction---Tax was a common burden for raising revenue compulsorily from the public---Tax „was a compulsory extraction of money by the government for a public purpose without reference to any special benefit on the payer of the tax and the amounts collected under a tax became part of the general revenue of the government---Fee on the other hand was levied for rendering some specific service and the amount collected went towards that particular purpose---In the case of a "fee" there must be an element of quid pro quo---"Tax" and "fee" were compulsory extraction of money but the difference between the two laid in the fact that the tax was not co-related to any particular service rendered but intended to meet the expenses of the government and a "fee" was meant to compensate the government for expenses incurred in rendering services to the persons from whom the fee was collected.

Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402 ref.

(e) Constitution of Pakistan---

----Art. 77 & Fourth Schedule, Parts I & II---Federal Legislative List--­Taxation---Non-tax entries on the Federal Legislative List---Question as to whether the non-tax entries or subject specific generic entries on the Federal Legislative List included the power to taxation---Federal Legislature had the power to make laws in respect of any matter in the Federal Legislative List---Taxation had been specifically dealt with under entries 43 to 53 of Part-I of the Federal Legislative List---Part-II of the Federal Legislative List did not provide for any specific taxation---Purpose of providing specific entries for taxation (entries 43 to 53 of Part-I of the Federal Legislative List) showed that the constitutional intent was to consider "taxation" as a separate subject---Taxation, therefore, could not be read into other generic subject entries in the Federal Legislative List as it enjoyed the status of a separate and distinct subject---Such special space carved out for taxation under the Constitution also found support from Art. 77 of the Constitution which mandated that tax could only be levied under the authority of an Act of Parliament---Such authority to impose taxation had to be specifically and clearly mentioned in the Constitution---In the presence of the specific and clear entries regarding taxation under entries 43 to 53 of Part-I of the Federal Legislative List, it could not be said that the generic entries also included the power of taxation-Taxation was a specific subject and unless specifically and clearly listed in the Federal Legislative List, the power of taxation, could not be read into the general subject entries.

State of W.B. and another v. Kesoram Industries Ltd. and others [(2004 (10) SCC 201] and Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and E.T.I.O. and others [2007(5) SCC 447] ref.

(f) Regulation of Generation, Transmission and Distribution of Electric, Power Act (XL of 1997)---

----S. 31 (5)---Law Reforms Ordinance (XII of 1972), S. 3---Intra-court appeal ---Excessive delegation of power by the Legislature to the Executive---Electricity tariff---Surcharge---Power of the Executive (i.e. Federal Government) to levy surcharge on electricity tariff---Legality and Constitutionality---Section 31(5) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, provided that "distribution company shall pay to the Federal Government such surcharge as the Federal Government, from time to time, notify in respect of each unit of electric power sold to the consumers..."---Said section did not specify the design and nature of surcharge to be imposed on the sale of the electric power; it also failed to provide legislative parameters or guidelines or legislative policy for determining the amount and nature of surcharge or the number of surcharges to be levied---Legislature has left it to the discretion of the Executive to decide what it wanted to recover and how---Power vested in the hands of the Executive (under S.31(5) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997) was unguided and uncontrolled ---Section 31(5) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, delegated an essential legislative function to the Executive which was not permissible under the Constitution---Foundations of excessive delegation owed its genesis to the doctrine of separation of powers, which was a fundamental principle of constitutional construct-Section 31(5) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, simply opened an unguided window and empowered the Executive to assume legislative responsibility, which offended separation of powers and fell within excessive delegation---Such unguided and unstructured delegation empowered the Executive with a power which was ex-facie discriminatory and hence not permissible under the Constitution-High Court declared S.31(5) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, and the impugned surcharges namely; Equalization Surcharge, Debt Servicing Surcharge, Universal Obligation Fund Surcharge and Neelum Jhelum Surcharge levied from time to time through impugned notifications, as unconstitutional and hence set-aside the same, and that the Federal Government by charging unconstitutional and illegal surcharges from the consumers of electricity had been unjustly enriched---High Court directed that the Federal Government should refund the amount of surcharges illegally extracted from the consumers; that NEPRA should work out the total amount of surcharges collected from the end consumers to date and evolve a plan for the repayment of the said amount through adjustment in tariff for the benefit of the end consumer---Intra-court appeal was allowed accordingly.

Khawaja Ahmad Hassan v. Government of Punjab and others 2005 SCMR 186; Engineer Iqbal Zafar Jhagra and another v. Federation of Pakistan and others 2013 SCMR 1337 and Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others PLD 1998 SC 64 ref.

(g) Taxation.--

--Imposition, administration and implementation of taxes---Legislature and Executive, powers of---Delegation of power of taxation by the Legislature to the Executive---Scope---Legislature was omnipotent in the exercise of the taxing prerogative---Whereas the right to impose taxes and to determine the circumstances under which they would be done was the privilege of the legislative power, administration of the tax law was the responsibility of the executive power---Certain limitations on the taxing power of the Legislature were self-evident-Since the power to raise taxes was a prerogative of the public authority, a Government had only the right to impose a levy in so far as it was competent to do so---Under such principle, all that was necessary was that the rights of the tax administration and the corresponding obligations of the taxpayers be specified in the law---Implementation of the tax was generally regulated by the executive power---Power to fix the rate of tax was a legislative power but if the Legislature laid down the legislative policy and provided the necessary guidelines, that power could be delegated to the Executive---Merely on the ground that the legislature had entrusted the power to alter, modify, vary the tax, a provision could not be held to be impermissible delegation provided the legislation had given its policy and the relevant Act provided sufficient guidelines.

Taxmann's Interpretation of Taxing Statutes pp.5-9 ref.

(h) Legislature---

----Delegation of power by the Legislature---Scope---Legislature could not repose any power, essentially legislative, in another body or organ; it could not efface itself and set up a parallel legislative authority; it must exercise its judgment on vital matters of policy and enact the general principles which should be embodied in the legislation---Legislature could, however, confer upon any person or body, fit to exercise it, the power to work out details and particulars for carrying out its policy and in order to give effect to the legislation in a particular direction---Legislature could not delegate its power to make a law but it could make a law to delegate powers to determine some facts or state of things upon which the law made or intended to make its own action dependant---Where the law was flexible, having laid down broad principles of its policy, the Legislature could leave the details to be supplied by the administrator to adjust to the rapid changing circumstances.

Taxmann's Interpretation of Taxing Statutes pp.5-9 ref.

Appellant'/Petitioners by:

Muhammad Azhar Siddique Assisted by Shahanshah `Shamil Pirracha, Muhammad Irfan Mukhtar, Muneer Ahmed, Shabbir Ahmad, Maryam Mazhar and Amna Liaqat, Mian Muhammad Hussain Chotya, Mustafa Kamal, Rana Ali Akbar Khan, Mian Muhammad Rashid, Miss Rohi Saleha, Muhammad Mohsin Virk, Shahzad Saleem Bhatti, Muhammad Asim Mumtaz, Adnan Ahmed, Muhammad Kamran Siddiqui, Hasham Ahmad Khan, Mian Tariq Mehmood, Mian Masroor Akbar, Ashfaq Ahmad Tabsassum, Muhammad Nawaz, Mirza Qasim Baig, Mirza Abbas Baig, Muhammad Junaid Ashraf, Saood Nasrullah Cheema, Malik Naveed Suhail, Mian Muhammad Tanveer Chotya, Fiaz Ahmed Khan Baloch, Hamad Shafqat Sulahria, Ch. Mumtaz ul Hassan, Azeem Akram, Ch. Farid Anwar, M. Irfan Liaqat, Rana Nadeem Ijaz, Khalil ur Rehman, Mohsin Ali, Saith Nadeem Hussain, Khurram Shahbaz Butt, Babar Ilyas Chatha, Ahmad Bilal, Rubia Latif, Naveed Shabbir Goraya, Ijaz Ahmad Awan, Mehar Shahid Mehmood, Ch. Muhammad Naseer Gujjar, Faisal Tahir, Ch. Inayat Ullah, Muhammad Adeel Chaudhry, Ch.Muhammad Shahbaz Kang, Amna Asif, Malik Aftab Aslam, Sheikh Akbar Ali Tahir, Mumtaz Ahmed Mangat, Jamil Khan, Rana Muhammd Zahid, Ch. Muhammad Ali, Ch. Abdul Razzaq, Ch. Anwaar-ul-Haq-I, Ms. Shabnum Aslam, Fakhar-uz-Zaman Akhtar Tarar, Rana Ali Akbar Khan, Malik Ahsan Mehmood, Muhammad Umer Riaz, Munir Hussain Panjotha, Irtiza Ali Naqvi, Sultan Hassan Malik, Ahmed Bilal Soofi, Mirza Bilal Zafar, Ch. Naveed Akhtar Bhutta, Main Tabssum Bashir, Abid Minhas, Misbah ul Hassan Qazi, Seth Iftikhar Ali Tayyab, Muhammad Javed Iqbal Qureshi and Muhammad Rasheed Bhatti.

Respondents By:

Mirza Nasar Ahmad and Mian Irfan Akram, Deputy Attorney Generals for Pakistan, Syed Akmal Hussain, Standing Counsel for Pakistan for Federation of Pakistan.

Munawar us Salam and Muhammad Shoaib Rashid for Ministry of Water and Power, Islamabad.

Muhammad Shafique for NEPRA.

Umer Sharif for WAPDA/NEPRA.

Amar Sikandar Ranjha and Mansoor Usman Awan for Respondent NEPRA.

Saad Rasool for WAPDA.

Rasaal Hassan Syed for WAPDA.

Sheikh Muhammad Ali, Barrister Haris Ramzan and Ms. Mubashra Khalid for NTDC/CPPA.

Sh. Muhammad Ali and Ms. Mubashra Khan for FESCO Sarfraz Ahmad Cheema for FESCO.

Aurangzeb Mirza for GEPCO.

Muhammad Ilyas Khan for LESCO and FESCO. Mian Muhammad Javaid for FESCO.

Dr. M. Irtiza Awan for IESCP.

Khalid Ishaq for GEPCO.

Syed Murtaza Ali Zaidi for RESCO and MEPCO.

Zargham Eshaq Khan, Joint Secretary, Ministry of Water and Power, Islamabad.

Muhammad Yousaf Raza, Manager Legal, LESCO and Muhammad Yasin Badar, Legal Consitant, LESCO.

Majid Khan, DG, Legal, NTDCL.

Syed Ausaf Ali, D.G. (Tariff) NEPRA.

Muhammad Shahzad, Addl. Secretary, CCI, Islamabad. Sabir Ali, CEO, PEPCO.

Qamar uz Zaman Farooqi, Joint Secretary (Bueget Imp), Ministry of Finance along with Khan Hafeez, Deputy Secretary, Ministry of Finance.

Amici Curiae:

Khaleeq-uz-Zaman, Waqqas Ahmad Mir, assisted by Hassan Niazi, Faizan Raja, Ms. Noor Bano Khan, Ms. Khizra Tariq, Ms, Fatima Arshad, Wasee-ul-Hasnain Naqvee, assisted by Barrister Saba Qaiser.

Assisted by:

Qaisar Abbas and Mo/lsirt Mumtaz, Civil Judi,cs/Researcb Officers, Lahore High

Court, Research Centre (LHCRC).

Dates of hearing: 16th, 17th, 18th, 19th, 23rd, 24th, 26th February, 2nd, 3rd, 9th, 10th, 11th, 12th, 18th, 19th, 20th, 24th, 25th and 26th March, 2015.

2015 P T D 2052

[Lahore High Court]

Before Shahid Jamil Khan, J

NORTHERN POWER GENERATION COMPANY LIMITED

versus

FEDERATION OF PAKISTAN and others

W.P. No.1063 of 2012, heard on 11th March, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5A), (5AA)---Constitution of Pakistan, Art. 199---Constitutional petition---Alternate remedy---Show-cause notice---Jurisdiction to issue---Petitioner, an assessee was aggrieved of show cause notice issued by Additional Commissioner---Validity---Where alternate remedy was available, non-exercise of jurisdiction under Art. 199 of the Constitution by High Court was rule to be applied for regulating its Constitutional jurisdiction---Exceptions to such rule were that show-cause notice or order was ultra vires, palpably without jurisdiction or with mala fide intent; availing of statutory remedy, against which, would be inefficacious because each action was to be nipped in the bud---In presence of exceptions, High Court should lean its discretion in favour of petitioner to provide him speedy and efficacious justice by issuing writ of certiorari---Where petitioner approached High Court for issuance of writ of certiorari by pleading jurisdictional issue on an interpretation of his choice and relevant provisions was susceptible to various interpretations, issuance of show-cause notice or an order was not palpably without jurisdiction or mala fide---High Court declared that petition questioning jurisdiction to issue show-cause notice on the basis of interpretation of statutory provision was not maintainable---High Court directed Taxation Officer/ Commissioner to take-up all objections taken or to be taken before him in reply to show-cause notice and decide through speaking order---Petition was dismissed in circumstances.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232; Nagina Silk Mill Lyallpur v. The Income Tax Officer, A-Ward, Lyallpur PLD 1963 SC 322; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2000 PTD 1392; Murree Brewery's Case PLD 1972 SC 279;Messrs Ocean Pakistan Ltd. v. Federal Board of Revenue, Islamabad and others 2012 PTD 1374; Deputy Commissioner of Income Tax/Wealth Tax, Faisalabad and others v. Messrs Punjab Beverage Company 2007 PTD 1347; Messrs H.M. Abdullah v. The Income Tax Officer, Circle V, Karachi and 2 others 1993 SCMR 1195; AC Ahram Builders (Pvt.) Ltd v. Income Tax Appellate Tribunal 1993 SCMR 29 and Income-Tax Officer and another v. Messrs Chappal Builders' case 1993 SCMR 1108 rel.

Sh. Zafar-ul-Islam, Niaz Ahmad Khan and Tanveer Ahmad for Petitioners (in W.Ps. Nos. 9756, 9758, 9760 of 2011 and 1063, 9340 of 2012).

Malik Mumtaz Hussain Khokhar for Petitioners (in W. Ps. Nos. 7120, 14459 of 2011, 2852, 3094, 3095, 3485, 3486, 5136, 5139, 5140, 5141, 8466, 8706, 9416 of 2012, 7922 of 2013 and 6131, 6132, 6133 of 2014).

Ch. Muhammad Anwaar, for Petitioner (in connected W. P. No. 5480 of 2012).

Agha Muhammad Akmal Khan and Tariq Manzoor Sial, for Respondents (in W.Ps. Nos. 7120, 9756, 9758, 9760 of 2011, 1063, 3094, 3095, 3485, 3486, 5136, 8706, 9340 of 2012).

Syed Khalid Javaid Bukhari for Respondents (in W.Ps. Nos. 5139, 5140, 5141 of 2012).

Mian Asghar Ali Gurdaspuri, for Respondents (in W.Ps. Nos. 6131, 6132, 6133 of 2014).

Khalid Khan, Additional Commissioner Inland Revenue, Sahiwal Zone, RTO Multan.

Date of hearing: 11th March, 215.

2015 P T D 2202

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

Messrs SWERA TRADERS

versus

CUSTOMS APPELLATE TRIBUNAL, LAHORE and 4 others

Custom Reference. No.14 of 2012, heard on 23rd February, 2015.

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

----Ss. 32, 16 & 196---S.R.O. 563(I)/2006 dated 5-6-2006---Import of goods---Mis-declaration of goods---Collusion---Scope---Untrue statement(s), error(s), collusion---Past and closed transactions---Interpretation of S. 32 of the Customs Act 1969---Scope---Importer/ assessee was served with show-cause notice under Ss. 16 & 32 of the Customs Act, 1969 on the ground that the assessee in collusion with clearing agent; manually assessed value of imported sugar less than what was fixed by S.R.O. 563(I)/2006 dated 5-6-2006---Contention of importer assessee was, inter alia, that if there was any lapse in charging of duty as per value fixed by S.R.O. 563(I)/2006 dated 5-6-2006; the same was a lapse on the part of the authorities and therefore was not "collusion" on part of the assessee and further that since the goods were out of charge and duties and taxes thereupon had been paid the same amounted to a past and closed transaction; therefore provisions of S. 32 of the Customs Act, 1969 could not be invoked---Held, that per S. 32 of the Customs Act, 1969 by reason of any document, which included "declaration" by reason of some "collusion" any duty and charge had not been levied or short levied; the person liable to pay any amount on such account, could be served with a show-cause notice within five years of the relevant date and relevant date, defined in S. 32(5)(a), for purpose of present case would be the date on which the order for clearance of goods was made---Assessee itself admitted in the goods declaration that applicable rate of sugar fixed in S.R.O. 563(I)/2006 dated 5-6-2006 was neither declared not assessed and in the show-cause notices, the short levy was alleged to be result of collusion between the assessee and the clearing agent ; therefore provisions of S. 32(2) of the Customs Act, 1969 were applicable---Merely because the goods were out of charge did not make the same a past and closed transaction as S. 32(2) of the Customs Act, 1969 provided a period of limitation of five years from relevant date for recovery of short levy which is a result of mis-declaration or collusion--Transaction would only become a past and closed transaction when limitation prescribed under law to open said transaction expired and vested right had been established in favour of the assessee---As long as limitation to issue show-cause notice had not expired; the transaction would not be a past and closed transaction and any other interpretation would render S. 32(2) of the Customs Act, 1969 as redundant---Contention that the short levy could not be recovered as it had already been passed onto the end consumer was also irrational and illogical---No illegality therefore, existed in the impugned orders---Reference was answered, accordingly.

Messrs S.T. Enterprises through Proprietor v. Federation of Pakistan through Secretary (Revenue Division/FBR), Islamabad and 4 others 2009 PTD 467 and Messrs Sunny Traders v. Federation of Pakistan and 4 others 2009 PTD 281 distinguished.

Collector of Customs (Preventive), Karachi v. Pakistan State Oil, Karachi 2011 SCMR 1279 = 2011 PTD 2220 and Messrs Al-Hamd Edible Oil (P) Ltd. and others v. Collector of Customs and others 2003 PTD 552 ref.

Nagina Silk Mill, Lyallpur v. The Come Tax Officer and others PLD 1963 SC 322 and Messrs V.N. Lakhani and Company v. M.V. Lakatoi Express and 2 others PLD 1994 SC 894 rel.

(b) Interpretation of statutes---

----Each and every word of a statute had to be given its meaning and no part of statute could be treated as redundant or surplus.

Messrs V.N. Lakhani and Company v. M.V. Lakatoi Express and 2 others PLD 1994 SC 894 rel.

Khurram Shahbaz Butt for Applicant.

Sarfraz Ahmad Cheema for Respondents.

Date of hearing: 23rd February, 2015.

2015 P T D 2236

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

Mst. ASMA JILANI and others

W.T.A. No.154 of 2002, heard on 2nd April, 2015.

Wealth Tax Act (XV of 1963)---

----S. 2(1)(5)(ii)---Registration Act (XVI of 1908), S. 17---Association of persons (AOP)---Transfer of property---Arbitration award/ agreement---Authorities did not accept arbitration award/agreement on the plea that the same had not conferred any ownership right on individuals/shareholders, unless the deed was registered under S. 17 of Registration Act, 1908---Plea raised by assessees was that the award was made rule of the Court, conferring them ownership right, therefore, registration was not required--- Validity---Authorities by their conduct of assessing as an AOP in previous years had accepted belonging of property to co-owners---When agreement for partition, based on an arbitration award/decree was implemented and respective portions of property were identifiably returned before authorities, it had no right under the provisions of Wealth Tax Act, 1963, to reject the same based on provisions of Registration Act, 1908---Question of law in appeal was vague and not representing any legal proposition, therefore, question was decided in affirmative and against authorities--- Appeal was dismissed in circumstances.

1998 PTD 2054; A.G. Simens's case 1991 SCC 773 and The Lungla (Syihet) Tea Co. Ltd., Sylhet v. Commissioner of Income Tax, Dacca Circle, Dacca 1970 SCMR 872 ref.

Muhammad Asad, Muhammad Ilyas Khan and Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU for Appellants.

Dr. Ilyas Zafar for Respondents.

Date of hearing: 2nd April, 2015.

2015 P T D 2256

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

COMMISSIONER INLAND REVENUE

Versus

TARIQ POLY PACK (PVT.) LTD.

S.T.R. No.98 of 2014, decided on 12th March, 2015.

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

----Ss. 8A, 8, 7, 3(3), 11 & 21 ---Sales Tax Rules, 2006, R. 12(5) ---Tax credit not allowed---Joint and several liability of registered persons in supply chain where tax was unpaid---Re-registration, blacklisting and suspension of registration---Interpretation of R. 12(5) of the Sales Tax Rules, 2006---Question before the High Court related to the determination extent of rights and liability of the purchaser regarding claim of refund/input tax adjustment against fake invoices issued by blacklisted units/suppliers ---Held, that Ss. 7 & 8 of the Sales Tax Act, 1990 were not charging provisions and were machinery provisions to crystallize liability to pay tax by the supplier as contemplated in S. 3(3) of the Sales Tax Act, 1990---Primary responsibility to issue genuine invoices after registration and to deposit tax was that of the supplier, who was also responsible to pay tax under S. 11(2) of the Sales Tax Act, 1990 and the purchaser who paid sales tax against supplies and already availed input tax adjustment against invoices issued could only be held liable for unpaid amount if it was proved that purchaser had knowledge and reasonable ground to suspect that tax payable will go unpaid in terms of S. 8A of the Sales Tax Act, 1990----In the present case, registered person made payment to the supplier under prescribed mechanism of VAT and no evidence had been recorded or produced by the Department to show that said taxpayer had prior knowledge or reasonable grounds to suspect that invoices were fake and tax paid by taxpayer shall be remained unpaid-Department had no doubt made out a case of tax fraud but in absence of any record and evidence, the initial burden of even civil standard was not discharged by the Department which results into inescapable conclusion that taxpayer/buyer was not liable jointly and severely under S. 8A of the Sales Tax Act, 1990---Section 8A of the Sales Tax Act, 1990 did not cast any allegation of collusion on part of buyer or supplier but simply required that buyer should have "knowledge" and "reasonable grounds" to suspect that the supplier would not eventually deposit the sales tax in exchequer paid and once it was admitted on all hands that at the time of transaction, the supplier was duly registered and also active with FBR, in order to attract the provision of S. 8A of the Sales Tax Act, 1990, the Department was required to prove that the purchaser was in the knowledge or reasonable ground to suspect, regarding the issuance of fake invoices by the fictitious supplier units and non-deposit of tax amount by the supplier---Rule 12(5) of the Sales Tax Rules, 2006 provided that during the period of suspension of registration, invoices issued by such person shall not be entertained and once such person is blacklisted, refund and input tax credit claimed against such invoices issued by said person, whether prior or after blacklisting shall be rejected through speaking order---Careful reading of R. 12(5) of the Sales Tax Rules, 2006 as a whole showed that through speaking order, all invoices issued after blacklisting of unit would be rejected; however, the word "prior" used in said R. 12(5) did not mean that all cluster of invokes issued prior to blacklisting would be rejected but it postulated that out of basket of invoices issued prior to blacklisting of supplier, those invoices would be rejected which were issued after suspension but before blacklisting-Words "through speaking appealable order and after affording an opportunity of being heard" used in said R. 12(5) enlarged its scope and empowered the assessing authority to reject even those specific invoices through speaking and reasoned order after hearing, which were though issued prior to blacklisting but were found fake and had direct nexus with blacklisting---High Court observed that it would be a fallacy to hold that mere blacklisting would automatically reject claims of input tax and refund against all validly issued previous invoices, when the supplier was not blacklisted rather was duly registered and active on Department website and said invoices having not been declared fake specifically, had no nexus with blacklisting---High Court further observed that no doubt ambiguity abounded R. 12(5) of the Sales Tax Rules, 2006 but. it would be unreasonable to hold that merely because supplier had become blacklisted, the entire series of invoices issued by him before blacklisting would be rejected as it would also infringe the accrued vested rights of the registered person/purchaser who held valid invoices when the supplier was not blacklisted but was rather active and duly registered---Reference was answered, accordingly.

Messrs F.M.Y. Industries Ltd v. Deputy Commissioner Income Tax and another 2014 SCMR 907; Commissioner of Income Tax v. Multan Fabrics (Pvt.) Ltd. and others 2013 PTD 2077; Commissioner Inland Revenue v. Rana Riasat Tufail and others 2014 PTD 1530 and Commissioner Inland Revenue v. Messrs the S.T.R. No. 98 of 2014 Lahore Textile and General Mils Limited S.T.R. No.88 of 2014 rel.

(b) Interpretation of statutes--

----Tax statutes---Where two interpretations are possible then one, which advances the cause of justice, was to be adopted and in case of any doubt, the same had to be resolved in favour of the taxpayer.

Imran Rasool, Muhammad Yahya Johar for Applicant (in P.T.R. No.270 of 2012).

M.M. Akram and Muhammad Ajmal Khan for Respondents (in P.T.R. No.270 of 2012).

Date of hearing: 12th March, 2015.

2015 P T D 2296

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

PUNJAB BEVERAGES CO. (PVT.) LTD. through Senior Finance Manager and others

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE and others

W.Ps. Nos.824, 825, 1355, 3008 of 2014, 24807 of 2013, 9548 of 2015 and 15377 of 2014, decided on 22nd May, 2015.

Income Tax Ordinance (XLIX of 2001)--

----Ss. 113(2)(c), 122, 127 & 133---Constitution of Pakistan, Art.199--- Constitutional petition---Alternate remedy---Petitioners were income tax assessees who assailed order-in-original without exhausting remedies available under Income Tax Ordinance, 2001--- Validity---Cases filed by petitioners were premature and preemptive as a question of law had yet to be framed in their cases based on facts of their case---Having gone through rigours of two appeals, cases of petitioners would ripen and then it was to be seen whether a question of law had arisen out of order of Income Tax Appellate Tribunal---Such was the intent of law and procedural form which had to be followed---Jurisdiction to High Court was given specifically under S. 133 of Income Tax Ordinance, 2001, to interpret a question of law and petitioners could not by-pass the entire process and pray for an interpretation on a question of law at an earlier stage in Constitutional petition---Each case of petitioners was to be decided on its own merits and each petitioner had opportunity to urge its case before Commissioner Inland Revenue, then if required before Income Tax Appellate Tribunal and then ultimately if required before High Court in a reference---Neither party could urge what the question of law was or be that would arise once the Appellate Tribunal had decided the case---If question of law was decided at such stage, the entire process given under Income Tax Ordinance, 2001, would become redundant and would give petitioners the ability to avoid due process as provided under Income Tax Ordinance, 2001, where a specific mechanism had allowed a case to become ripe before it could be seen whether a question of law was made out---Essentially exhaustion of specialized remedies under Income Tax Ordinance, 2001, was necessary before seeking interference from High Court---Petition was dismissed in circumstances.

Commissioner Inland Revenue, Zone-II, Karachi v. Messrs Kassim Textile Mills (Pvt.) Limited, Karachi 2013 PTD 1420; Mughal-e-­Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary and 4 others 2011 PTD 2260; Collector of Customs, Customs House, Lahore and 3 others v. Messrs S.M. Ahmad and Company (Pvt.) Limited, Islamabad 1999 SCMR 138; Commissioner of Income Tax, Companies-II and another v. Hamdard Dawakhana (Waqf), Karachi PLD 1992 SC 847 and Anjuman-e-Ahmadiya, Sargodha v. (1) The Deputy Commissioner, Sargodha and (2) The Government of West Pakistan, through the Secretary Colonies, Board of Revenue, West. Pakistan, Lahore PLD 1966 SC 639 ref.

Shahid Pervez Jami and Mudassar Shujauddin for Petitioners (In W.Ps. Nos.824, 825, 1355 and 3008 of 2014).

Khurram Shahbaz Butt for Petitioners (In W.Ps. Nos.24807/2013 and 9548/2015).

Muhammad Younas Khalid and Muhammad Ajmal Khan for Petitioner (In W.P. No. 15377/2014).

Malik Asad Mehmood and Muhammad Ilyas Khan, for Respondents.

Saeed-ur-Rehman Dogar for Respondent FBR (In W.Ps. Nos.824 and 825 of 2014).

Date of hearing: 3rd April, 2015.

2015 P T D 2335

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs ISLAM STEEL MILLS

P.T.R. No.338 of 2013, decided on 25th February, 2015.

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

----Ss. 161, 160 & 153----Failure to pay tax collected or deducted Obligation of Department and taxpayers--- Taxpayers were served with show-cause notice under S. 161 of the Income Tax Ordinance, 2001 for failure to pay tax deducted as withholding agents---Contention of tax payers was that while they were withholding agents and were liable to deduct/withhold tax from payments made against supplies / purchases, however, taxpayers were not in possession of the record relating to the relevant tax period and it was obligation of the Department to have specified in the notice, persons in which respect of which deduction should have been made---Held, that question to be determined was whether Department had specified certain transactions in which respect to which tax had to be withheld by the taxpayers----Perusal of show-cause notice showed that it specified the payments for purchases of scrap and reagent with regard to which the taxpayers were obliged to deduct tax under S. 153(1)(a) of the Income Tax Ordinance, 2001 Only obligation for Income 'Tax Authorities / Department was for them to specify that payments had been made by the taxpayers on which they were obliged to deduct tax as required under the Income Tax Ordinance, 2001 and such a notice would only be given once that Department came to the conclusion that tax ought to have been deducted from payments made by the taxpayer and that the taxpayer was a withholding agent; and thereafter the onus shifted to the taxpayer to bring forth evidence to show that it was not liable to deduct tax as a withholding agent and there was thus no failure on its part in terms of S. 161 of the Income Tax Ordinance, 2001---High Court observed that Department was merely under an obligation to make a reference of the details of the supplies and payments made and to point out that they were prima facie covered by S. 161 of the Income Tax Ordinance, 2001 and it is then for the taxpayer to discharge the onus as to why deductions were not made--- Taxpayers, merely by stating that they were not in possession of the record for the relevant period did not validly discharge such onus and in the absence of anything to the contrary, it would be deemed that there was a failure to collect and deduct tax on the part of the taxpayers and hence they were personally liable to pay the amount of tax to the Department-Reference was answered, accordingly.

Messrs Bilz (Pvt.) Ltd. v. Deputy Commissioner of Income Tax, Multan and another 2002 PTD 1 rel.

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

----Ss. 161 & 160---Income Tax Ordinance (XXXI of 1979) Ss. 50 & 52----Failure to pay tax collected or deducted---Deduction of tax at source---Interpretation of S. 161 of the Income Tax Ordinance, 2001--­Similarity of S. 50(4) of the Income Tax Ordinance, 1979 with S. 161 of the Income Tax Ordinance, 2001---Section 50(4) of the Income Tax Ordinance, 1979 must be read with S. 52 of the Income Tax Ordinance, 1979 and likewise S. 161 of the Income Tax Ordinance, 2001 must be read in conjunction with S. 161 of the Income Tax Ordinance, 2001, for said provisions, when read together completed the scheme envisaged by the Legislature---Reading of the two provisions did bring forth an ineluctable fact that they were similar in material particulars and were meant for the same purpose and only difference was that S. 161 of the Income Tax Ordinance, 2001 made a reference to Divisions II and III and Chapter XII of the Income Tax Ordinance, 2001 and was thus more elaborate in its application whereas S. 50(4) of the Income Tax Ordinance, 1979 was self- contained and the payments in respect of which deductions were to be made were enumerated therein---Section 161 of the Income Tax Ordinance, 2001 was in fact more rights-based in favour of the taxpayer and it conferred a right to be heard and did not make taxpayer liable for the recovery of tax to be deducted if such tax had meanwhile been paid by the person---High Court observed that ratio decidendi of the judgment of the Supreme Court in Messrs Bilz (Pvt.) Ltd. v. Deputy Commissioner of Income Tax, Multan and another (2002 PTD 1), including the principle of law it enunciated, and the intelligible criteria it lay down to be followed, equally applied, with greater force, to cases under S. 161 of the Income Tax Ordinance, 2001.

Messrs Bilz (Pvt.) Ltd. v. Deputy Commissioner of Income Tax, Multan and another 2002 PTD 1 fol.

Saeed-ur-Rehman Dogar for Applicant.

Syed Abid Raza Kayani for Respondent.

Date of hearing: 25th February, 2015.

2015 P T D 2368

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs SHAH SPINNING MILLS LTD.

P.T.R. No.209 of 2014, heard on 19th March, 2015.

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

----Ss. 113(2)(c) las re-enacted by Finance Act (I of 200911 & 133---Minimum tax on income of certain persons---Carry forward and adjustment of excess tax under S. 133(2)(c) against tax liability in subsequent years---Amendments in S. 113(2)(c) of the Income Tax Ordinance, 2001 to apply prospectively---Scope---Question before the High Court was whether adjustment of tax under S. 113(2)(c) claimed for the years 200.5 to 2008 was to be governed by S. 113(2)(c) of the Income Tax Ordinance, 2001 as it stood during the years 2005 to 2008 or was the same to be governed by S. 113(2)(c) as it stood in the years 2010 and 2011 in which years the said tax amount was carried forward and adjusted---Held, that S. 113(2)(c) of the Income Tax Ordinance, 2001 prevailing in the years 2005 to 2008 was repealed in 2008 and was reenacted through the Finance Act, 2009 and was to apply prospectively---High Court observed that the claim of carry-forward adjustment made by the taxpayer for both the tax years (2010 and 2011) was to be governed under (now repealed) S. 113(2)(c) of the Income Tax Ordinance, 2001 prevailing in the years 2005 to 2008 when excess amount was carried forward and not under the re-enacted S. 113 in the years 201,0 and 2011 when the said amount was actually adjusted by the taxpayer---Reference was answered, accordingly.

(b) Interpretation of statutes---

----Amendment/repeal---Effect---Retrospective application of repealed/ amended statutes---Scope---Change in substantive law which divested and adversely affected vested rights of parties shall always have prospective application unless by express words of the legislation or by necessary intendment or implication such law had been made applicable retrospectively---In absence of a stipulation to the contrary, any change in law affecting substantive rights had to have a prospective effect.

(c) Constitution of Pakistan--

---Art. 264-General Clauses Act (X of 1897) S. 6----Repeal of law--­Effect---Scope and purpose of Art. 264 of the Constitution---Once a vested right accrued in favour of a party under a statute, and if that statute was subsequently repealed, such right could not be disregarded---Purpose of Art. 264 of the Constitution and S. 6 of the General Clauses Act, 1897 was to provide protection to rights and liabilities accrued and penalties incurred under repealed enactment---In absence of a stipulation to the contrary, any change in law affecting substantive rights had to have a prospective effect.

The Colonial Sugar Refining Co. Ltd. v. Irving LR (1905) AC 369; F.B. Ali v. State PLD 1975 SC 506; Sutlej Cotton Mills Ltd. v. Industrial Court PLD 1966 SC 472; Shohrat Bano v. Imsail 1968 SCMR 574; Garikapati v. Subbiah Chaudhry AIR 1957 SC 540; P.I.A. Corporation v. Pak Saaf Dry Cleaners PLD 1981 SC 553; Nazir Begum v. Qamarunnisa 1982 CLC 2271; Muhammad Ibrahim v. Surrayiaun Nisa PLD 1992 SC 637; Mian Rafiud Din v. Chief Settlement and Rehabilitation Commissioner PLD 1971 SC 252; Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward Lyallpur and another PLD 1963 SC 322; Adnan Afzan v. Capt. Sher Afzal PLD 1969 SC 187; Nabi ,Ahmed and another v. Home Secretary, Government of West Pakistan, Lahore and 4 others PLD 1969 SQ.'. 599; Province of East Pakistan v. Sharafatullah and 87 others PLD 1970 SC 514; Sona and another v. The State and others PLD 1970 SC 264; Hassan and others v. Fancy Foundation PLD 1975 SC 1; The Collector, Customs and Central Excise, Peshawar and others v. Messrs Rais Khan Limited through Muhammad Hashim 1996 SCMR 83; Malik Gul Hasan and Co. and 5 others v. Allied Bank of Pakistan 1996 SCMR 237; Manzoor Ali and 39 others v. United Bank Limited through President 2005 SCMR 1785; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 PTD 1392; Muhammad Tariq Badr and another v. National Bank of Pakistan and others 2013 SCMR 314 and Badshah Gul Wazir v. Government of Khyber Pakhtunkhwa through Chief Secretary and others 2015 SCMR 43 rel.

Mian Yusuf Umar for Applicant.

Rana Munir Hussain for 'Respondent.

Date of hearing: 19th March, 2015.

2015 P T D 2498

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan and Shahid Jamil Khan, JJ

Messrs EN EM INDUSTRIES LTD.

Versus

The COMMISSIONER OF INCOME TAX, SPECIAL ZONE, LAHORE

C.T.R. No.23 of 2005, decided on 30th April, 2015.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 23(1)(xviii) & 66A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Admissible deductions---Taxpayer/assessee impugned order of Commissioner and Appellate Tribunal whereby penal interest/additional mark-up charged by the Financial Corporation for non-payment of loan by assessee/ taxpayer, was held to be a consequence of infraction of law, and deemed to be not an admissible deduction under S. 23(1)(xviii) of the Income Tax Ordinance, 1979----Validity---Order of Commissioner under S. 66A of the Income Tax Ordinance, 1979 showed that the Commissioner was not confident about his opinion that penal interest / additional markup was a result of an infraction of law---High Court observed that the Commissioner and the Appellate Tribunal had not ascertained the fact relating to the infarction of law and for invoking provisions of S. 66A of the Income Tax Ordinance, 1979; Authority had to show that the order was erroneous as well as prejudicial to the interest of the revenue, admitted fact of reversal of mark-up in question which was duly offered for taxation in subsequent years showed that no prejudice was caused to the revenue---Provisions of S. 66A could not be invoked in the present case---Reference was answered in favour of the taxpayer/assessee, accordingly.

Commissioner of Income Tax v. Premier Bank Limited, Karachi 1999 SCMR 1213 and Sui Southern Gas Company Ltd. v. Commissioner of Income Tax, Companies-V, Karachi PLD 2001 SC 201 distinguished.

Mian Ashiq Hussain for Appellant.

Malik Asad for Respondent.

Dr. Ishtiaq Ahmad, Additional Commissioner, Inland Revenue, Lahore.

2015 P T D 2522

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Karim, JJ

PUNJAB MINERAL DEVELOPMENT CORPORATION LTD.

Versus

COMMISSIONER OF INCOME TAX

P.T.R No.67 of 2004, decided on 10th March, 2015.

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

----Ss. 30, 26, 22(a), 11 & Fifth Schedule, Part II---Special provisions regarding business of insurance and production of oil and natural gas and exploration and extraction of other mineral deposits----Terms "profit" and "gain" used under Rr. 1 & 2 of Part II of the Fifth Schedule to the Income Tax Ordinance, 1979---Scope---Interest on Bank deposits, as "income from other sources"---Taxpayer was engaged in the business of exploration and extraction of mineral deposits, and the question before the High Court was whether income earned by taxpayer as interest from financial institutions was to be assessed under Part-II of the Fifth Schedule of the Income Tax Ordinance, 1979 as in terms of S. 26(c) of the Income Tax Ordinance, 1979 or was the same to be assessed under S. 30 of the Income Tax Ordinance, 1979, as income from other sources---Held, that perusal of the provisions revealed that income earned as "interest from financial institutions" was not "profit" and "gain" from business of exploration and extraction of mineral deposit and Rr. 1 & 2 of Part-II of the Fifth Schedule of the Income Tax Ordinance, 1979 when placed in juxtaposition with Ss. 11, 22(a) & 30 of the Income Tax Ordinance, 1979 left no room for doubt that income earned as interest being income from other sources was to be assessed under S. 30 of the Income Tax Ordinance, 1979 and not under Part-II of the Fifth Schedule of the Income Tax Ordinance, 1979---Under R. 1 of Part II of the Fifth Schedule of the Income Tax Ordinance, 1979; only the profit and gain from extraction or exploration of mineral deposits was to be computed under the said provision and merely because taxpayer being a statutory body, was authorized under its statute to make investments and Bank deposits, would not change the character of interest as "income from other sources" to income against business of exploration and extraction of mineral deposits---Reference was answered, accordingly.

Messrs Habib Insurance Co. Ltd. v. Commissioner of Income-Tax (Central), Karachi PLD 1985 SC 109 and Muhammad Mukhtar and others v. Muhammad Sharif and others 2007 SCMR 1867 ref.

Uch Power (Pvt.) Ltd. and others v. Income Tax Appellate Tribunal and others 2010 PTD 1809 = 2010 SCMR 1236 and Genetech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan Lahore and others 2004 SCMR 1319 rel.

Messrs Habib Insurance Co. Ltd. v. Commissioner of Income-Tax (Central), Karachi PLD 1985 SC 109 distinguished.

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

----S. 133---Reference to High Court---Only those questions of law could be raised for the opinion of the High Court under S. 133 of the Income Tax Ordinance, 2001 which were arising out of order of Appellate Tribunal.

Messrs S.M.Y. Industries Limited v. Deputy Commissioner Income Tax and others 2014 SCMR 907 rel.

Mian Ashiq Hussain for Applicant.

Muhammad Nawaz Waseer and Dr. Ishtiaq Ahmad, Additional Commissioner for Respondents.

Date of hearing: 10th March, 2015.

2015 P T D 2538

[Lahore High Court]

Before Shahid Jamil Khan, J

DEFENCE HOUSING AUTHORITY

Versus

COMMISSIONER INLAND REVENUE and others

W.P. No.30253 of 2014, decided on 26th June, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122, 174, 177(7) & 214C---Constitution of Pakistan, Art. 199---Constitutional petition---Universal Self-Assessment Scheme---Audit, selection of case---Doctrine of "structuring discretion"---Principle---Grievance of assessees was that they submitted their income tax returns under Universal Self-Assessment Scheme but authorities had selected there cases for audit---Validity---Universal Self-Assessment Scheme, under Income Tax Ordinance, 2001, could not be construed to have given a Carte Blanche to tax payers, who had declared tax payable as per their whims---Confidence was reposed on tax payer, presuming that payable tax declared in income tax return was in accordance with law---State had right to audit income tax affairs of a person, at least once in six years, hence his selection for audit could not be termed as detrimental to his rights---Power of Federal Board of Revenue to select for audit was not unbridled, the discretion was to be exercised justly, fairly and in transparent manner---Federal Board of Revenue needed to frame rules keeping in view the doctrine of "structuring discretion"---If Federal Board of Revenue failed to rationalize and regulate powers of selecting case and conducting audit through rules, Courts might intervene more often than was necessary to undo an exercise of power, appearing arbitrary and capricious at times---High Court directed Member (Audit) of Federal Board of Revenue to examine each case at his end and in case he formed an opinion that tax payer was wrongly selected, he would pass order accordingly---Petition was disposed of accordingly.

Messrs Ittefaq Rice Mills v. Federation of Pakistan and others 2013 PTD 1274 and JDW Sugar Mills Ltd. v. Federation of Pakistan and others Writ Petition No.19084 of 2013 ref.

Government of N.W.F.P. through Secretary and 3 others v. Majee Flour Mills (Private) Limited 1997 SCMR 1804 and Amanullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092 rel.

Navid A. Andrabi for Petitioner.

Khurram Shahbaz Butt, Muhammad Mohsin Virk, Tariq Mohmmod, Muhammad Ijaz Ali Bhatti, Sayyid Ali Imran Rizvi, Shahzad A. Elahi, Rana M. Afzal, Muhammad Ajmal Khan, Sumair Saeed Ahmed, H.M. Majid Siddiqui, Mian Ashiq Hussain, Ch. Muhammad Arshad, Sajid Ijaz Hotiana, Imtiaz Rashid Siddiqui, Barrister Shehryar Kasuri and Jamshid Alam, M.M.Akram, and Syed Nasir Ali Gillani for the Petitioners in connected petitions.

Sarfraz Ahmad Cheema, Malik Asad on behalf of Muhammad Ilyas Khan for Respondents.

Liaquat Ali Chaudhry, Saeed ur Rehman Dogar, Muhammad Asif Hashmi, Muqtadir Akhtar Shabbir, Ch. M. Tariq, Tariq Saleem Sh. Shahid Sarwar Chahal and Dr. Javed Iqbal Sh. for the Respondents in connected petitions.

Muhammad Anwar Khan for Respondent FBR.

Tahir Mehmood Ahmad Khokhar, Standing Counsel for Pakistan.

Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU, Lahore.

Syed Ijaz Hussain Shah, Member (Audit) FBR.

Haroon M.K.Tareen, Director General (I&I) Inland Revenue.

Ch. Muhammad Tariq, Director (Law), FBR, Lahore.

Shaukat Hayat Cheema, Secretary (ST&FE-L&P), FBR, Islamabad.

2015 P T D 2549

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan and Shahid Jamil Khan, JJ

MUZAFFAR ALI

Versus

COMMISSIONER OF WEALTH TAX

C.T.R. No.49 of 1996, heard on 12th May, 2015.

Wealth Tax Act (XV of 1963)---

----S.2(m)---Wealth Tax Rules, 1963, R.8---"Debt owed"---Advance rent---Liability in wealth tax return---Assessee claimed that advance rent received by him for five years was a liability in wealth tax return and sought deduction of amount from his gross wealth---Validity---Advance rent of five years was received by assessee which was being adjusted every month and in the event of pre-mature termination, the amount of advance rent was refundable---Appellate Tribunal rightly found that at the most it could be termed as contingent liability i.e. on premature termination of tenancy agreement otherwise its character was of advance rent for five years---As the advance rent was adjustable and was an uncertain liability on the valuation date, therefore, it could not be termed as "debt owed" within the meaning of S.2(m) of Wealth Tax Act, 1963---Reference was answered in the affirmative.

Union of India v. Harbhajan Singh Dhillon (1972) 83 ITR 582 and Commissioner of Wealth Tax v. Noor Rai Ibrahim 1992 SCMR 766 ref.

Mian Ashiq Hussain for Applicant.

Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU, for Respondent.

Date of hearing: 12th May, 2015.

2015 P T D 2561

[Lahore High Court]

Before Shahid Jamil Khan, J

Messrs PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY through Director

Versus

The FEDERATION OF PAKISTAN through Secretary and 8 others

Writ Petition No.17187 of 2015, decided on 8th June, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A) & 211---Constitution of Pakistan, Art. 199---Constitutional petition---Functions of authorities---Assessee was aggrieved of order passed by Inland Revenue authorities---Validity---Order in question was passed by authorities in ignorance of provisions of S. 211 of Income Tax Ordinance, 2001---High Court set aside said order and referred the matter to authorities for decision afresh on question of jurisdiction before proceeding further---Petition was disposed of accordingly.

Mian Ashiq Hussain for Petitioner.

Malik Asad on behalf of Muhammad Ilyas Khan on Court's call.

2015 P T D 2624

[Lahore High Court]

Before Shahid Jamil Khan and Sardar Muhammad Sarfraz Dogar, JJ

COMMISSIONER OF INCOME TAX

Versus

MUSLIM INSURANCE CO. LTD.

P.T.R. No.675 of 2007, heard on 9th June, 2015.

Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Income Tax Ordinance (XLIX of 2001), Ss. 62 & 133---Original order, revision---Inspecting Additional Commissioner---Powers of---Scope---Authorities were aggrieved of the order passed by Income Tax Appellate Tribunal whereby order passed under S. 66- A of Income Tax Ordinance, 1979, was vacated---Validity---Instructions/guidelines could not have overriding effect on statutory provisions of law---Main functions under S. 66-A of Income Tax Ordinance, 1979 was supervisory, in order to ensure that on account of any error, there was no loss of revenue, caused to department---To ensure so Inspecting Additional Commissioner could enhance, modify, cancel or direct for fresh assessment to be made---Two ingredients i.e., (i) if the order passed by Assessing Officer was erroneous; (ii) if the same was prejudicial to the interest of Revenue; should arise out of the assessment of Assessing Officer simultaneously so that Inspecting Additional Commissioner could invoke revisional jurisdiction under S.66-A of Income Tax Ordinance, 1979---If any of the such two ingredients was not available then Inspecting Additional Commissioner could not invoke jurisdiction under S.66-A of Income Tax Ordinance, 1979,---Provisions of section 66-A of Income Tax Ordinance, 1979, which had given supervisory jurisdiction to Inspecting Additional Commissioner could not be made redundant or dormant because of the application of word used "as approval accorded or discussion or consultation but the same was meant to safeguard the interests of revenue"---Consultation with Inspecting Additional Commissioner at assessment stage was purely administrative or ministerial in nature and it was not binding on Deputy Commissioner---Subsequent exercise of powers under S.66-A of Income Tax Ordinance, 1979, by Inspecting Additional Commissioner could not be termed as change of opinion---High Court set aside the orders passed by Income Tax Appellate Tribunal and the orders passed by Inspecting Additional Commissioner were upheld---Reference was allowed accordingly.

Commissioner of Income Tax v. Messrs Unilever P.L.C. U.K. 2002 PTD 44 and 1987 PTD (Trib.) 563 rel.

Malik Asad, Muhammad Ilyas Khan and Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU for Appellants.

Sh. Aqeel Ahmad, Kh. Farooq Saeed for Respondent (in I.T.As. No.409 of 1999).

Muhammad Ajmal Khan for Respondent (in I.T.As. Nos. 382 and 383 of 1999).

Date of hearing: 9th June, 2015.

2015 P T D 2639

[Lahore High Court]

Before Ijaz ul Ahsan, J

Messrs CARVAN ENTERPRISES through Manager

Versus

CENTRAL BOARD OF REVENUE through Second Secretary and 3 others

W.P. No.11929 of 2006, decided on 2nd June, 2015.

Sales Tax Act (VII of 1990)---

----S. 45A----Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.32----Constitution of Pakistan, Art.199---Constitutional petition----Power of the Board and Commissioner to call for records ----Finality of recommendations of Federal Tax Ombudsman----Scope----Petitioner's / taxpayer's sales tax refund was sanctioned by the Department whereafter show-cause notice was issued stating that said refund was not admissible; and order-in-original was passed against the petitioner, which was upheld in appeal----Petitioner's complaint against said orders was allowed by Federal Tax Ombudsman and the Federal Tax Ombudsman recommended cancellation of impugned orders---Department, thereafter in exercise of powers under S. 45A of the Sales Tax Act, 1990 reopened the order in appeal and issued show-cause notice to the petitioner ----Contention of petitioner was that no representation under S. 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 was filed by the Department before the President, and as such, the order of the Federal Tax Ombudsman attained finality and Department cannot now refer matter for de novo consideration---Held, that the Federal Tax Ombudsman never made any recommendation for reopening the petitioner's case for de novo consideration and even the impugned order under S. 45A of the Sales Tax Act, 1990 proceeded on a erroneous premise----Order of the Federal Tax Ombudsman had not been challenged and had attained finality---High Court observed that ex facie, the order under S. 45A of the Sales Tax Act, 1990 did not meet the requirements of the General Clauses Act, 1897 and the principle of audi alteram partem or S.45A of the Sales Tax Act, 1990---Impugned order was set aside and matter was sent to the Department to issue notice to the petitioner taxpayer and hear him in the matter and thereafter pass an appropriate order in accordance with law in light of recommendations of the Federal Tax Ombudsman---Constitutional petition was allowed, accordingly.

Mian Abdul Ghaffar for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

2015 P T D 2654

[Lahore High Court]

Before Ayesha A. Malik, J

Messrs RAFIQUE ENTERPRISES through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary and 4 others

W.P. No.21279 of 2013, heard on 13th September, 2013.

Customs Act (IV of 1969)---

----S.26---Constitution of Pakistan, Art.199---Constitutional petition---Information to be furnished by importer---Release of seized consignments---Consignments were opened in presence of Clearing Agent of importers---Department was able to check consignments and had obtained all necessary information about consignments for purpose of establishing their case on conditions in which consignments were imported---Held, that there was no justification for department to seize the consignments---Consignments should have been released upon payment along with surety bonds to the satisfaction of the department---Department would continue with their investigation strictly in accordance with law---Importer was directed to participate in the investigation and provide department with necessary documents called for vide notice under S.26 of Customs Act, 1969---Order accordingly.

Mian Abdul Ghaffar for Petitioner.

Irteza Ali Naqvi for Respondents Nos. 3 and 5.

Nadeem Mahmood Mian for Respondents Nos. 2 and 4 along with Jamil Nasir Khan, Additional Director Customs Intelligence.

Date of hearing: 13th September, 2013.

2015 P T D 193

[Peshawar High Court]

Before Yahya Afridi and Ikramullah Khan, JJ

Messrs ASSOCIATED INDUSTRIES LTD. through Executive Director

Versus

GOVERNMENT OF PAKISTAN through Federal Secretary Finance and Revenue Division, Islamabad and 4 others

Writ Petition No.1425 of 2010, decided on 29th May, 2014.

(a) Constitution of Pakistan---

----Art.73---Money bill---Special procedure---Object and purpose---Rationale behind time-bound summary procedure is to ensure that matters relating to fiscal and monetary issues, which are urgently needed for economic viability and sustainability of country, are not delayed or entangled with rigors of parliamentary procedure.

(b) Taxation---

----Object, scope and purpose---Tax is a compulsory extraction by State through legislation for meeting needs of all organs of State and for well-being of people---Purpose and aim of levy of taxation is always general, undefined and final decision for its actual allocation rests solely with State---Taxation, in the present day and age, is not only a source of raising money to meet government expenditure but has matured into a fiscal tool to achieve fiscal, monetary and social objectives---Final authority remains with State to decide how collected Taxes are to be utilized.

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

----S.6 & Preamble---Constitution of Pakistan, Arts.78, 82, 83, 84 & 199---Constitutional petition---Workers' Welfare Fund---"Tax" or "fee"---Determination---Petitioners, in the present case, were industrial organizations aggrieved of introduction of enhanced contribution in Workers' Welfare Fund Ordinance, 1971, through Money Bills---Validity---State had no discretion to utilize contribution made by industrial establishment to the Fund, other than specific purpose, as had been provided in Workers' Welfare Fund Ordinance, 1971---Such specification of the purpose and ultimate use of contribution and its defined purpose rendered the same to be outside the scope of 'tax'---All taxes collected by State were revenue and formed part of Federal Consolidated Fund---While 'all other moneys', provided in Art. 78(2) of the Constitution, included levy of Workers' Fund, as the same was collected and received by Federal Government through Income Tax Department in Public Account of Federation and thereafter had to be transferred to the Fund established under Workers' Welfare Fund Ordinance, 1971---Once contribution in question had formed part of Public Account of Federation would not require Constitutional sanction for its disbursement, as was necessary for all revenues including 'taxes' received by Federation under Arts. 82, 83 & 84 of the Constitution---If contribution in question was a 'tax', legislature would have clearly declared the same to be a 'tax' or in case intention was to deem it as one, appropriate 'tax credit' would have been provided for the same to industrial establishments under enabling legal taxation regimes---In absence of any clear provision, levy in question did not fall within the scope of a 'tax'---Industrial establishments paying contribution would benefit though indirectly, if work force employed by it was provided essential accommodation and other facilities from the contributions---Requisite 'quid pro quo' between payer of the contribution and benefit accruing therefrom was not direct but was reasonably and substantially established---High Court declared levy of contribution in question introduced in Workers' Welfare Fund Ordinance, 1971, through Finance Acts, 1996 and 2009, ultra vires, as it lacked essential mandate to be introduced and passed through Money Bill under the Constitution---Petition was allowed in circumstances.

Messrs Mutual Funds's case 2010 PTD 1924; Messrs Shahbaz's case4 2013 PTD 969; East Pakistan Chrome Tannery's case 2011 PTD 2643; Messrs Azgard's case PLD 2013 Lah. 282; Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306; Messrs Shahbaz Garments (Pvt.) Ltd. and others v. Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others PLD 2013 Sindh 449; Sheikh Muhammad Ismail's case PLD 1966 SC 388; Sheikh Spinning Mill's case 1999 SCMR 1402; Constitution of India by V.N. Shukla (10th Edition); Jagannath Ramanujdas's case AIR 1954 SC 400; H.H. Sudhindar Thirtha Swaniar's case AIR 1963 SC 966; Zenith Lamp's case (1973) 1 SCC 162; The Hingir-Rampur Coal Co.'s case AIR 1961 SC 459; Mir Muhammad Idris's case PLD 2011 SC 213; Sindh High Court Bar Association's case PLD 2009 SC 879; Abdul Majid's case PLD 1960 Dacca 502; Rahimullah's case 1992 SCMR 750; Delhi Cloth and General Mills Co. Ltd.'s case AIR 1971 SC 344; Thachambalath Sadasivam's case AIR 1985 SC 756 and Messrs Dewan Chand Bulider's caser 2008 SCR 117 ref.

Isaac Ali Qazi, Shumil Ahmad Butt and Ishtiaq Ahmad for Petitioners.

Syed Muhammad Attique Shah, D.A.G. Rehmanullah Qaiser Abbass and Ishtiaq Ahmad, Ghulam Shoaib Tully and Mian Naveed Kakakhel for Respondents.

Date of hearing: 29th May, 2014.

2015 P T D 231

[Peshawar High Court]

Before Yahya Afridi and Ikramullah Khan, JJ

NORTHERN BOTTLING (PVT.) LTD. through Chief Operating Officer

Versus

FEDERATION OF PAKISTAN through Secretary and 2 others

Writ Petition No.1153-P with C.Ms. Nos.529, 613-P of 2014, decided on 16th September, 2014.

(a) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope---Historically, jurisdiction of a High Court under Art. 199 of Constitution has its genesis in the "Court of Equity"---Convention has developed with time that while exercising its jurisdiction under Art. 199 of the Constitution, High Court has to apply equitable principles in its judicial dispensation----Constitutional Court, in appropriate cases, may mould relief already sought in a petition or even grant fresh relief appropriate for just and equitable resolution of dispute pending adjudication.

Salahuddin's case PLD 1975 SC 244; Messrs Facto Belarus Tractors Limited Karachi's case PLD 2006 Kar. 479; All Pakistan Textile Mills Association's case PLD 2009 Lah. 494; Mst. Amina Begum's case PLD 1978 SC 220; Marghub Siddiqi's case 1974 SCMR 519 and Mehrab Khan's case 2005 CLC 441 rel.

(b) Interpretation of statutes---

----Subordinate legislation---Scope---Generally subordinate or delegated legislation empowers delegatee to exercise authority only to the extent of authority delegated to it by delegator under the law.

Administrative Law (8th Edition) and Khalid Mehmood's case PLD 2011 Pesh. 120 rel.

(c) Federal Excise Duty and Sales Tax on Production Capacity (Aerated Water) Rules, 2013---

----R.6 (1) [as amended by notification S.R.O. No. 140(I)/2014, dated 28-2-2014]---Constitution of Pakistan, Art.199---Constitutional petition---Amendment in law---Effect---Petitioner company was aggrieved of amendment introduced in R.6(1) of Federal Excise Duty and Sales Tax on Production Capacity (Aerated Water) Rules, 2013, with retrospective effect---Validity---Amendment would have "prospective" effect and could not be applied "retrospectively" for the reasons: Firstly that the S.R.O.140 did not expressly provided amendments introduced in the Rules to have retrospective effect; secondly that subordinate legislation could not operate retrospectively unless the parent law empowered it to do so and thirdly that rights already accrued in favour of a person under a valid law could not be taken away through subordinate legislation---Amendment introduced in R.6(1) of Federal Excise Duty and Sales Tax on Production Capacity (Aerated Water) Rules, 2013, whereby total adjustment of Federal Excise Duty and Sales Tax was ultra vires of Sales Tax Act, 1990 and Federal Excise Duty Act, 2005---Enhanced rates provided in R.4 of Federal Excise Duty and Sales Tax on Production Capacity (Aerated Water) Rules, 2013, would take legal effect from 28-2-2014---Petition was allowed in circumstances.

Pakistan Fruit Juice Company's case Writ Petition No.17893 of 2013 ref.

Ashtar Ausaf Ali, Muhammad Imran and Asad Rehim Khan for Appellants.

F.M. Sabir, Standing Counsel.

Ghulam Shoaib Jolly for Respondent.

Date of hearing: 16th September, 2014.

2015 P T D 374

[Peshawar High Court]

Before Yahya Afridi and M. Younis Thaheem, JJ

COMMISSIONER OF INLAND REVENUE ZONE-II, REGIONAL TAX OFFICE, PESHAWAR

Versus

Messrs SAYDON PHARMACEUTICAL INDUSTRIES (PVT.) LTD., INDUSTRIAL ESTATE, JAMRUD ROAD, PESHAWAR

Income Tax Reference Applications Nos.26-P and 27 of 2013, decided on 21st October, 2014.

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

----Ss.177, 114 & 122---Selection for audit---Criteria---Filing of revised returns after initiation of audit---Effect---Competent authority to initiate audit of a person under S. 177 of the Income Tax Ordinance, 2001, was the Commissioner, and such audit not only related to the income tax returns filed by the person but also related to such person's "entire income tax affairs"---Determination criteria for selection for audit of a person was not restricted to returns filed by the said person but it may include the person's history of compliance or non-compliance with the Income Tax Ordinance, 2001; the amount of tax payable, the class of business conducted and any other matter, which in the opinion of the Commissioner, was material for the determination of the person's correct income---Conduct of the audit comprised of the income tax affairs, including examination of accounts and record, inquiry into expenditure, assets and liability of the person under audit---Scope of audit, thus, was not restricted to just returns filed by the person who was under audit---If the audit was based solely on particulars stated in the tax return filed, and the taxpayer filed revised tax return for the said tax year under S. 114 of the Income Tax Ordinance, 2001, and if the same clarified all the issues raised in the audit notice; then said audit would conclude, and the revised tax returns so filed would have to be accepted, and amended assessment order would be passed under S. 122 of the Income Tax Ordinance, 2001---If the revised tax return only clarified a part of the issues raised in the notice of audit, and not all, under such circumstances, when all issues raised in the notice for audit were not clarified, then the audit would proceed and appropriate amended assessment order was to be passed under S. 122 of the Income Tax Ordinance, 2001.

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

----Ss. 177 & 122---Selection and conduct of audit---Amendment of assessment---Competent authority to initiate and conduct audit---Express delegation of authority---Scope---Competent authority to initiate proceedings under Ss. 122 & 177 of the Income Tax Ordinance, 2001 was the Commissioner; who could delegate authority to another officer to proceed; however the same was required to be done through an express delegation.

(c) Administration of justice---

----When the foundation lacked legal mandate, the entire super-structure built thereon would surely fall.

Ishtiaq Ahmad for Petitioner.

Muhammad Haroon for Respondent.

Date of hearing: 13th November, 2014.

2015 P T D 472

[Peshawar High Court]

Before Yahya Afridi and Musarrat Hilali, JJ

COMMISSIONER OF INLAND REVENUE ZONE-II, REGIONAL TAX OFFICE, PESHAWAR

Versus

ROOH-UL-AMIN, UNIVERSITY BOOK AGENCY, BANK ROAD, MARDAN

Income Tax Reference Application No.39-P of 2012, decided on 18th June, 2014.

(a) Interpretation of statutes---

----Prospective effect---Scope---Legislation is prospective unless it expressly or impliedly provides the same to have retrospective effect.

(b) Interpretation of statutes---

----Fiscal statute---Imposing of taxes---Principles---Charging provisions imposing taxes are to be strictly construed in favour of taxpayer, so that if there is a doubt or two interpretations, then it has to be resolved in favour of taxpayer---Provisions which provide for the machinery by which taxes are assessed and recovered are to be liberally construed in favour of the Revenue, in order to ensure that realization of proper taxes is made possible.

Eli Lilly's case 2009 SCMR 1279 rel.

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

----Ss.120, 122 (2) [as inserted by Finance Act (I of 2009)] & 133(1)---Assessment order, reopening of---Amendment in law---Retrospective effect---Scope---Income Tax authorities reopened assessment orders on the basis of amendment made in S. 122(2) in Income Tax Ordinance, 2001, through Finance Act, 2009---Appellate Tribunal declared the amendment as prospective in nature---Validity---Time period of reopening of assessment order was extended under S. 122(2) of Income Tax Ordinance, 2001, and the amendment had no retrospective effect and would apply to cases in which assessment orders were passed after the date of legislation in question---Assessment orders which were passed or deemed to be passed under enabling provisions of S. 120 of Income Tax Ordinance, 2001, prior to 1-7-2009, the same would be 'closed and past transactions' 'qua' applicability of amended provisions, as valuable rights in favour of taxpayer had accrued---Amendment extending time period to amend assessment orders, in which 'rights' had matured into 'vested rights' could not be amended under extended period provided under S. 122(2) of Income Tax Ordinance, 2001, introduced through Finance Act, 2009---High Court declined to interfere in order passed by Appellate Tribunal---Reference was declined in circumstances.

Adnan Afzal's case PLD 1969 SC 187 and Eastern Federal Insurance Company's case PLD 1982 SC 247 ref.

Ishtiaq Ahmad Junior for Petitioner.

Jan Alam Afridi for Respondent.

Date of hearing: 18th June, 2014.

2015 P T D 570

[Peshawar High Court]

Before Yahya Afridi and Haider Ali Khan, JJ

SULTAN MUHAMMAD

Versus

COLLECTOR CUSTOMS and another

Custom Reference No.26 of 2010,decided on 20th November, 2014.

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

----Ss. 17, 156, 193, 194-A & 196---Detention and confiscation of vehicles---Reference to High Court---In the present case, vehicles were either smuggled ones or their certificate of registration, and bill of entry were suspected to be forged---Such vehicles were detained and were got examined through Forensic Science Laboratory---Chemical Examiner's report had confirmed that original chassis of the vehicles had been cut at the site of the chassis number, and another metallic piece had been welded---In view of said report, vehicles were detained and confiscated---Appeals filed against said confiscation, was dismissed by Appellate Authority---Appellate Tribunal upheld the order of confiscation---High Court declined interference and answered the Reference in negative.

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

----Ss. 6, 7 & 17---Provincial Motor Vehicles Ordinance (XIX of 1965), S.33---Detention and confiscation of vehicle having tampered chassis number---Procedure---Manipulation of the chassis number of the vehicle, including the cutting of chassis plate, the removal thereof and welding another piece having the chassis number thereon was confirmed by the Forensic Science Laboratory and amounted to "tampering", especially, when owner was unable to explain and justify the said manipulation of the chassis number---Revenue, was only authorized to seize and confiscate the vehicles, which were non-duty paid---Presumption of truth was attached to the report of Forensic Science Laboratory being a result of an official act---In case serious infirmities appeared on record, which cast reasonable doubt on the presumption of truth attached to Forensic Science Laboratory report, evidence could be recorded of the official, who carried out the Forensic Science Examination---Law did not require the "Maker" of the report to be summoned and cross-examined by the owner of vehicle---Tampering of chassis number as a result of an accident of vehicle, could only be a valid ground, if same was reported and confirmed by Motor Vehicles Authority under S.33 of the Provincial Motor Vehicles Ordinance, 1965---Public auction of vehicles with tampered chassis, was prohibited, and were liable to be confiscated---Confiscated vehicles, with tampered chassis numbers, were allowed for the use by Government Departments on payment of nominal/token prices---Sections 6 and 7 of Customs Act, 1969 provided for all officers of Central Excise, Police and Civil, Armed Forces, to assist the Customs Officers for carrying out their functions under Customs Act, 1969.

Muhammad Aftab Khan's case Civil Petition No.1809/L of 2002; Zarshad's case 2006 SCMR 973; Fahim Khan's case Civil Petition No.117 of 2006; Ch. Maqbool Ahmad's case 2009 SCMR 226; Muhammad Jamal Rizvi's case 2012 SCMR 169; Saleh Jan's case Civil Appeal No.58-P of 2010 and Khalil Muhammad's case Civil Petition No.1788 of 2012 ref.

(c) Constitution of Pakistan---

----Art. 189---Decision of Supreme Court---Binding force---Scope---Courts not to follow contrary view to the Supreme Court, in view of the command and mandate of Art.189 of the Constitution.

Ajoon Khan for Petitioner.

Muhammad Ali for Respondents.

Date of hearing: 20th November, 2014.

2015 P T D 630

[Peshawar High Court]

Before Yahya Afridi and Ms. Musarrat Hilali, JJ

SHAUKAT KHAN AND COMPANY through Shaukat Ali

versus

COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, PESHAWAR

Income Tax Reference Application No. 10-P of 2014, decided on 25th September, 2014.

(a) Interpretation of statutes---

----Retrospective effect---Penal provision---Scope---Unless Legislature expressly provides taxing or a penal provision to be retrospective, the same would apply prospectively.

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

----Ss. 78, 153 [as amended by Finance Act (XVI of 2011)] & 161---Presumptive Tax Regime (PTR)---Tax at source, non-deduction of---'Withholding agent' or 'prescribed person'---Scope---Retrospective effect of amendment---Assessee filed income tax return under PTR but proceedings under Ss. 153 & 161 of Income Tax Ordinance, 2001, were initiated on the allegation of non-deduction of tax at source as 'withholding agent' or 'prescribed person'---Validity---Amendment in S. 153 of Income Tax Ordinance, 2001, expanded scope of 'prescribed person' as a 'withholding agent' to collect advance tax on payments made, therefore, amendment not only imposed additional obligation upon taxpayer to act as 'withholding agent' of collecting advance tax but it also imposed pecuniary liability on him for failing to act and collect the same, therefore, such amendment would not have retrospective effect---Role of 'withholding agent' and liability occruing for failure thereof could not be retrospectively saddled upon assessee for any period before introduction of amendment for the provision having prospective effect---High Court maintained the orders passed by Commissioner as the same were in accordance with law and that of Appellate Tribunal Inland Revenue was declared to be against the law---Reference was answered in affirmative in circumstances.

Irfan Javed for Appellant.

Qaiser Abbas Bangash for Respondent.

Date of hearing: 25th September, 2014.

2015 P T D 734

[Peshawar High Court]

Before Yahya Afridi and Ikramullah Khan, JJ

Messrs AL-IMDAD GENERAL TRADING CO. through Proprietor

versus

PAKISTAN through Secretary, Ministry of Commerce, Islamabad and 5 others

Writ Petition No.3036 of 2011, decided on 23rd December, 2014.

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

----Ss.3 & 13---Notifications S.R.O. 165(I)/2010, dated 10-3-2010---S.R.O. 180(I)/2011, dated 5-3-2011---S.R.O. 283(I)/2011, dated

1-4-2011---Constitution of Pakistan, Art.199---Constitutional petition---Claim of lower lower rate of sales tax---Petitioners claimed to run their business concerns in the most affected areas in war on terrorism and claimed benefit of notifications (SROs)---Validity---Provisions of notification S.R.O. 180(I)/2011, dated 5-3-2011, extended a 'territory specific benefit' to person engaged in business in 'affected areas', whereas notification S.R.O. 283(I)/2011, dated 1-4-2011, provided a 'sector specific benefit' to textile sector, throughout the country---Petitioners fell within the purview of those entitled to 'benefits' under both the SROs as they were registered and carrying on business in 'affected areas' and that too in 'textile sector'---Provisions of notification S.R.O. 180(I)/2011, dated 5-3-2011, had restricted the 'benefit' to 50% of the rate of sales tax leviable under S. 3(1) of Sales Tax Act, 1990---High Court declared that notification S.R.O. 180(I)/2011, dated 5-3-2011, was illegal being based on 'mala fide in law'---Petitioners being entitled to benefits provided under notification S.R.O. 165(I)/2010, dated 10-3-2010 and notification S.R.O. 283(I)/2011, dated 1-4-2011, and the effect thereto had to be duly extended to petitioners---Petitioners from 1-4-2011 were to be charged 50% of the rate of sales tax provided under notification S.R.O. 283(I)/2011, dated 1-4-2011---Petition was disposed of accordingly.

Abdul Ghani's case PLD 2007 SC 308; Osman Khan's case 2010 CLC 475; Muhammad Naseem Khan's case 2013 PTD 2005; Muhammad Ajmal's case 2009 CLC 647 and Hasnat Ahmad Khan's case 2010 SCMR 354 ref.

Dr. Akhtar Hussain Khan's case 2012 SCMR 455; Saeed Ahmad Khan's case PLD 1974 SC 151 and Begum Agha Abdul Karim Shorish Kashmiri's case PLD 1969 SC 14 and Messrs Saif Textile Mill's case Writ Petition No.2011 of 2012 rel.

(b) Constitution of Pakistan---

----Art.199---Constitutional petition---Moulding of relief---Principle---Constitutional Court may mould relief already sought in petition or even grant fresh relief appropriate for just and equitable resolution of dispute pending adjudication.

Salahuddin's case PLD 1975 SC 244; Messrs Facto Belarus Tractors Limited Karachi's case PLD 2006 Kar. 479; All Pakistan Textile Mills Association's case PLD 2009 Lah. 494; Mst. Amina Begum's case PLD 1978 SC 220; Marghub Siddiqi's case 1974 SCMR 519 and Mehrab Khan's case 2005 CLC 441 rel.

(c) Words and phrases---

----"Mala fide"---Import.

True import of mala fide in as under:--

(i) Generally, the term 'mala fide' can be divided into two; 'mala fide in fact' and 'mala fide in law'.

(ii) 'Mala fide in fact' attributes an actual malice upon the "maker" of the impugned action, (iii) 'Mala fide in law' does not attribute any personal or actual malice upon the "maker" but the action is wrongful or without any reason or justification.

Black's Law Dictionary (Ninth Edition); The Law of Lexicon (Second Edition (Reprint) 2002; Corpus Juris Secundum, A Complete Restatement of The Entire American Law (Volume-54); Mitra's Legal and Commercial Dictionary (Sixth Edition) and Judicial Review of Public Actions rel.

(d) Constitution of Pakistan---

----Art.199---Constitutional petition---Judicial review---Scope---In order to maintain balance in trichotomy of power' of a State, 'legislature' through legislation vests authority in the 'executive' and while exercising its vested jurisdiction it has to proceed in a lawful, 'bona fide' and fair manner---Never is the 'executive' given authority under any statute to exercise its jurisdiction in a colourable 'manner excessively on 'mala fide'---Any action or order passed by even a competent authority, without essential attributes of fairness or 'bona fide', would render such action justiciable and can be struck down by the 'judiciary' (Constitutional Court) in judicial review.

Abdul Rauf's case PLD 1965 SC 671; Begum Agha Shoraish Kashmiri's case PLD 1965 SC 623; Ziaur Rehman's case PLD 1973 SC 49 and Saeed Ahmad's case PLD 1973 SC 151 rel.

(e) Interpretation of statutes---

----Fiscal statute---Grant of benefits---Principle---Interpreting fiscal provisions relating to grant of 'benefits' that the same have to be positively and liberally construed in order to ensure that the benefits' intended to be granted are actually given effect to in a meaningful manner.

Isaac Ali Qazi for Petitioner.

Mian Naveed Gul Kakakhel and Ishtiaq Ahmad for Respondents.

Date of hearing: 23rd December, 2014.

2015 P T D 796

[Peshawar High Court]

Before Yahya Afridi and Lal Jan Khattak, JJ

Messrs KHAN AND CO. MANZ KALI, KOWAR MANG, BISHAM

versus

DEPUTY COMMISSIONER-IR (AUDIT-IX), ZONE-III, R.T.O., PESHAWAR and another

Sales Tax Reference No.15-P of 2014, decided on 1st December, 2014.

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

----S. 47---Reference to High Court---Factual controversy---Determination---Factual determination is beyond the scope and jurisdiction vested in High Court under S. 47 of Sales Tax Act, 1990---Domain to determine and decide same rests with various rungs of adjudicating authorities culminating before Tribunal under Sales Tax Act, 1990.

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

----Ss. 3 & 65---Sales Tax Rules, 2006, R. 4---Deduction of sales tax---Unregistered persons---Petitioners were coal suppliers to cement company and during scrutiny it was found that they failed to pay sales tax for the supplies made to the company---Demand of sales tax made by Assessing Officer was maintained by Commissioner (Appeals) and also by Appellate Tribunal Inland Revenue---Validity---All persons mentioned in R. 4 of Sales Tax Rules, 2006, making taxable supplies in furtherance of their business were liable to registration under Sales Tax Act, 1990, and were bound to pay sale tax in accordance with mandate provided therein---Petitioners could not be dislodged from their claim of not being liable to registration and thereby made to pay sales tax on supplies made to the company, as record was silent regarding the fact whether petitioners fell within the categories of persons liable to registration under R. 4 of Sales Tax Rules, 2006---Petitioners could not claim any benefit of the fact that company did not deduct sales tax under Sales Tax Special Procedure Withholding Rules, 2007---High Court declined to interfere in the order passed by Appellate Tribunal Inland Revenue as the same was correct on the questions of law it deliberated---High Court set aside the decision of the Tribunal to the extent that it did not decide whether petitioners fell within the categories of person liable to registration under R. 4 of Sales Tax Rules, 2006, and matter was remanded to the Tribunal for decision afresh---Reference was answered accordingly.

Shahid Qayyum Khattak for Petitioner.

Ishtiaq Ahmad (Junior) for Respondents.

Date of hearing: 1st December, 2014.

2015 P T D 851

[Peshawar High Court]

Before Yahya Afridi, J

MUZAMMIL HUSSAIN

versus

The STATE

Criminal Revision No.51-P with Criminal Miscellaneous No.147-P of 2014, Criminal Revision No.52-P, with Criminal Miscellaneous No.149-P, Criminal Revision No.74-P, with Criminal Miscellaneous No.194-P, Criminal Revision No.75-P, with Criminal Miscellaneous No.199-P, Criminal Revision No.76-P with Criminal Miscellaneous No.201-P, Criminal Revision No.77-P with Criminal Miscellaneous No.203-P, Criminal Revision No.78-P with Criminal Miscellaneous No.205-P, Criminal Revision No.79-P with Criminal Miscellaneous No.207-P, Criminal Revision No.80-P with Criminal Miscellaneous No.209-P, Criminal Revision No.81-P with Criminal Miscellaneous No.211-P and Criminal Revision No.82-P with Criminal Miscellaneous No.213-P of 2014, decided on 21st November, 2014.

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

----Ss. 3, 4, 179, 185, 185-A, 185-B, 185-C & 185-F---"Proceedings, adjudication by Customs Authorities", and "trial before Customs Judge"---Scope---Both the proceedings could proceed simultaneously and independently.

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

----Ss. 2(s), 17, 156(9)(90) & 185-F---Confiscation of allegedly smuggled goods---Petitioner, contended that goods imported by him, being not "notified goods" under S.2(s) of Customs Act, 1969, at the best the petitioner could be proceeded under Clauses (9) and (90) of subsection (1) of S.156 of Customs Act, 1969---Validity---Trial Court was to first review the case, put up before it by the prosecution/Revenue; 'challan' and the record therewith; and then to frame the 'charge' against accused---Such authority of the Trial Court, would remain intact, during the proceedings of the trial; and in case the evidence produced by the parties would constitute an offence punishable other than one for which accused was charged, the Trial Court had the legal mandate to amend the charge already framed---High Court was not to 'clog' or pre-empt the authority of the Trial Court for trying the petitioner---If evidence produced by the parties, constituted an offence provided under clauses (9) and (90) of subsection (1) of S.156 of the Customs Act, 1969, the charge so framed by the Trial Court, could be amended at the stage of trial---High Court would not pre-empt the discretion and authority of the Trial Court, in its proceedings with the trial---Impugned order of the Customs Judge, was in accord with the safe dispensation of criminal justice, which warranted no interference by High Court in its revisional jurisdiction.

Mian Abdul Ghaffor for Appellant.

Fazal Mola Chattan for the State.

Syed Zamarud Shah, Standing Counsel along with Muhammad Jamil for Respondent.

Date of hearing: 21st November, 2014.

2015 P T D 1190

[Peshawar High Court]

Before Malik Manzoor Hussain, J

SAEED-UR-REHMAN----Appellant

versus

CENTRAL BOARD OF REVENUE, through Director General Intelligence, Islamabad and 2 others----Respondents

Regular First Appeal No.3 of 2004, decided on 3rd February, 2014.

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

----O. VII, R. 11---Customs Act (IV of 1969), S.47---Suit for recovery of damages on the basis of mental torture, humiliation and disrespect---Maintainability---Scope---Rejection of plaint---Scope---Appeal---Competency---Plaintiff filed suit wherein defendants moved an application for rejection of plaint which was accepted by the Trial Court---Validity---Defendants-Customs and Excise Department received information that plaintiff-company which was recorded as closed was in production and was supplying the goods/cigarettes in the market without payment of Central Excise duty and sales tax---Factory of plaintiff was visited by the Customs officials and record was taken into possession which was involved in the production of cigarettes---Plaintiff-company had evaded central excise duty and sales tax and complaint was lodged against the same---Present suit was barred under S.217 of Customs Act, 1969---During pendency of appeal plaintiff had died before getting any decree in his favour and his legal heirs had been impleaded who could not continue to persue the suit after his death as right to sue in such case being personal to the deceased did not survive---Suit for compensation on the basis of wrong done was personal to the person wronged---No mala fide could be alleged in presence of such strong evidence against the official who were bound to protect the interest of the State---Plaint was rightly rejected by the Trial Court---Appeal was dismissed in circumstances.

A. Majid Sama v. The Asbestos Cement Industry Ltd. 1996 MLD 803 and Mercantile Co-Operative Bank Ltd. v. Messrs Habib and Co. and others PLD 1967 Kar. 755 rel.

(b) Maxim---

----"Actio personalis moritur cum persona"---Meaning---Personal right of action dies with the person.

Abdul Latif Afridi for Appellant.

Moin-ud-Din Hamayun for Respondents.

Date of hearing: 3rd February, 2014.

2015 P T D 1733

[Peshawar High Court]

Before Yahya Afridi and Muhammad Daud Khan, JJ

COLLECTOR CUSTOMS, CUSTOMS HOUSE, JAMRUD ROAD, PESHAWAR

versus

SALMAN KHAN and 3 others

Customs Reference No.75 of 2011, decided on 25th March, 2015.

Customs Act (IV of 1969)---

----Ss. 2 (s), 15, 16, 156 (I) (90), 181, 187, 196 & 244---Notification S.R.O.499(I)/2009, dated, 13-6-2009---Smuggled goods---Redemption---Customs authorities recovered smuggled foreign cloth from a vehicle and seized both the goods and vehicle---Authorities confiscated the goods but allowed release of vehicle on payment of 20% redemption fine---Appellate authority modified the order and also allowed to release of goods on payment of redemption fine equal to 30% of customs value of goods---Customs, Federal Excise and Sales Tax Appellate Tribunal partially allowed appeal by reducing certain duties and fine---Validity---Initial onus to prove valid importation and payment of duties and taxes or even its lawful possession was upon the person in possession of questionable goods under S. 187 of Customs Act, 1969, read with S. 156(1)(90) of Customs Act, 1969---If person in possession of questionable goods or its owner was unable to discharge his onus to prove valid importation or lawful possession, the same would come within the mischief of term "smuggled goods" under S.2(s) of Customs Act, 1969---Any "smuggled goods" as provided under S.2(s) of Customs Act, 1969, could be released on payment of redemption fine under S. 181 of Customs Act, 1969, unless expressly notified by the Federal Government under the first proviso to S. 181 of Customs Act, 1969---Concerned officer in absence of any compelling reasons, must not withhold exercise of discretion of giving option to owner of goods under S. 181 Customs Act, 1969, in lieu of payment of fine, except in the cases in which goods could not be allowed to be circulated in market or goods which were imported in violation of S. 15 of Customs Act, 1969, or of the notification issued under S.16 of Customs Act, 1969---Officers dealing with confiscated goods, on payment of fine, could not alter the same at their own discretion---Fact whether questionable goods seized were foreign or locally manufactured, was a question of fact, which could be agitated and decided before forums provided under Customs Act, 1969, and not before High Court in its jurisdiction under S. 196 of Customs Act, 1969---Orders issued by Federal Board of Revenue under S. 181 of Customs Act, 1969, was delegated legislation and was distinct from the orders issued under S.244 of Customs Act, 1969---Provisions of S.R.O. 499(I)/2009, dated 13-6-2009, were orders issued by Federal Board of Revenue under S.181 of Customs Act, 1969, and were binding upon customs officers, even when they were adjudicating the matters as qusi judicial authorities under Customs Act, 1969---High Court set aside judgments passed by the forums below and reference was answered in affirmative.

Abdur Rauf Khan's case 1980 SCMR 114; Sikandar A. Karim's case 1995 SCMR 36; Malik Fateh Khan's case Civil Appeal No.757 of 2007; Abu Bakar Siddique's case 2006 SCMR 705; Musa Gul's case CPLA No.196-P of 2003 decided on 3-11-2003; Ch. Maqbool Ahmad's case 2009 SCMR 226; Gul Mar Khan's case F.A.O. No.24/2002 decided on 24-1-2006 and Messrs Sawal Khan's case S.A.O. No.14/2002 decided on 26-2-2004 ref.

Ishtiaq Ahmad for Petitioner.

Nemo for Respondents.

Date of hearing: 25th March, 2015.

2015 P T D 2033

[Peshawar High Court]

Before Yahya Afridi and Rooh-ul-Amin Khan, JJ

AQIL KHAN

versus

CUSTOMS APPELLATE TRIBUNAL, PESHAWAR and 4 others

Customs Reference No.53-P of 2013, decided on 16th June, 2015.

(a) Constitution of Pakistan---

----Art. 189---Decision of Supreme Court binding on other courts---Article 189 of the Constitution ordained all to follow directions so rendered by Supreme Court of Pakistan.

Abu Bakar Siddique's case 2006 SCMR 705 rel.

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

----Ss.179 & 185-A---Cognizance of offence by Special Judge---Scope---Findings recorded by Special Judge Customs while proceeding under S.185-A of Customs Act, 1969 trying offence punishable thereunder were not binding upon Customs Authorities adjudicating cases under S.179 of Customs Act, 1969.

Adam's case PLD 1969 SC 446; Muhammad Sarwar's case 1988 PCr.LJ 213; Sabro's case 1992 PCr.LJ 1795 and Mehmood Ahmad Qureshi's case 2002 SCMR 1527 rel.

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

----S.181---Option to pay fine in lieu of confiscated goods---Customs Authorities had seized the gold imported by importer---No ban existed on import of gold and import policy had ordained its import by registered persons---Held, that it was illegal exercise of discretion by customs officer in confiscating without providing the owner of confiscated gold an option to pay penalty in lieu of confiscation.

Abu Bakar Siddique's case 2006 SCMR 705 rel.

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

----S.181---Option to pay fine in lieu of confiscated goods---Scope---Contention of respondent was that petitioner was a carrier and not owner---Held, that reply of petitioner to show-cause notice served upon him and even during proceedings petitioner had never admitted to be carrier on behalf of true owner---Adjudicating authorities had erroneously relied upon findings of Special Judge to try petitioner for penal offences under Customs Act, 1969---Case was remanded to Adjudicating Officer with direction to provide an opportunity to the appellant for proving the ownership of seized and confiscated goods and if found to be true owner, provide him an option on payment of penalty in addition to duties and taxes under the law in like of the confiscation of the goods.

Asif Wardik for Petitioner.

Hashim Raza for Respondents.

Date of hearing: 16th June, 2015.

2015 P T D 2114

[Peshawar High Court]

Before Yahya Afridi and Mrs. Irshad Qaiser, JJ

Messrs AL-KHAIR TRADERS through Sole Proprietor

versus

COLLECTOR CUSTOMS and 2 others

Customs Reference No.49-P of 2013, decided on 15th July, 2015.

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

----S. 195---Powers of Federal Board of Revenue to pass certain orders---Administrative and Adjudicating Authority, scope of---Legislature had envisaged three distinct regimes for regulating and carrying out essential aims embodied in Customs Act, 1969 which could be generalized as administrative or executive authority, quasi judicial adjudicating authority and judicial authority trying penal provisions---Administrative and Adjudicatory authorities were not only distinct and independent of each other but had been assigned separate role in Customs Act, 1969---Such authorities had to remain within their assigned legal jurisdiction---Adjudicatory authority had to decide impartially disputes which arose between persons and executive authority---Executive authority was carrying on its functions as collecting arm of revenue---Apart from passing administrative decisions relating to matters concerning export, import, preventive or anti-smuggling operations, authority had to decide whether decisions so made by Adjudicatory authorities required any correction before appellate forums provided in Customs Act, 1969---According to S.195 of Customs Act, 1969, role of Collector of Customs was to exercise executive authority and only if conditions stated therein were fulfilled, he would assume role of an adjudicatory authority.

Khan Trading Company's case 2002 CLC 705 rel.

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

----S. 195---Reopening of cases, powers of---According to S. 195 of Customs Act, 1969, intention of Legislature was to provide a corrective mechanism to ensure proper fair administration of taxation at every rung of executive/administrative authority of FBR---Under S. 195 of Customs Act, 1969 reopening of cases was not to be viewed as coercive tool rather it was a corrective tool to ensure proper administration of taxation, preventing loss of duties and taxes on one hand and to avoid harm of excess recovery of duties and taxes by revenue from taxpayers on the other hand.

(c) Words and phrases---

----Legality---Connotation---"Legal person" meant an individual, company or other entity which had legal rights and was subject to obligation; quality or state of being legal; obligations imposed by law.

Oxford English Dictionary; Black's Law Dictionary; 21st Century Dictionary and Webster's New Explorer Encyclopedic Dictionary rel.

(d) Words and phrases---

----"Propriety"---Meaning---Correctness concerning standards of behavior or morals; details or rules of conventionally accepted behavior; appropriateness; rightness.

Oxford English Dictionary; 21st Century Dictionary and Webster's New Explorar Encyclopedic Dictionary rel.

(e) Discretion----

----Scope---No absolute or unbridled power was vested in any authority may it be executive or quasi-judicial or judicial authority---Discretion had to be subject to reason and law.

R.V. Boteler (1864) rel.

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

----S. 195---Expression "As he deems fit" occurring in S.195 Customs Act, 1969; meaning of---Interpretation of S.195 of the Customs Act, 1969---Words "as he deems fit" could not be viewed myopically and thereby be exaggerated in isolation---Intent of Legislature was for the same to be exercised fairly, reasonably and in furtherance of general aim of Customs Act, 1969---Discretion so vested by Legislature was not to render absolute powers to Collector of Customs to pass orders based entirely on his whims and without considering his position and function assigned in the Customs Act, 1969.

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

----S. 195---Reopening of cases, powers of---Authority of re-opening of cases vested in Collector of Customs was to be based on objective legal criteria which was to be germane to functions, scope and limits of its authority provided under Customs Act, 1969.

Raja Ram Mahadev Paranjype's case AIR 1962 SC 753; V.C. Rangadurai's case AIR 1979 SC 281; Muhammad Farooq Imam's case PLD 1964 SC 585; Tufail Muhammad's case PLD 1965 SC 269 and Aagra Electric Supply Company's case AIR 1970 SC 806 rel.

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

----S. 223---Orders by Federal Board of Revenue---Scope---According to S. 223 of Customs Act, 1969 intention of legislature regarding segregation of FBR's administrative and executive authority from quasi-judicial adjudicatory authority provided under Customs Act, 1969 was clear---Directions of FBR under S. 223 of Customs Act, 1969 were administrative policy decisions which were generally expressed as Customs General Orders---Customs General Orders were binding on all Customs Officers while acting in their executive/administrative capacity under Customs Act, 1969---Customs General Orders would have no binding force before adjudicatory authorities exercising quasi-judicial functions under Customs Act, 1969.

M.A. Rahman's case 1988 SCMR 691; Commercial Pipe (Pvt.) Limited's case PLD 1989 Lah. 89; Muhammad Munir Hussain's case PTCL 1998 CL 275; Messrs United Refrigeration Industries (Pvt.) Ltd's. case 2000 CLC 1660; Muhammad Tasleem's case 2002 MLD 296;Messrs Civil Aviation Authority's case 2004 PTD 3005; B.P. Industries (Pvt.) Limited's case 2008 PTD 164 and Filters Pakistan (Private) Limited's case 2010 PTD 2036 rel.

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

----Ss.195, 193 & 196---Powers of Federal Board of Revenue, Collector of Customs---Regimes for regulating and carrying out the aims embodied in the Customs Act, 1969 categorised.

(I) There are three distinct regimes for regulating and carrying out the aims embodied in the Act. The same can generally be categorized as follows:

· Administrative or Executive Authority.

· Quasi Judicial adjudicating Authority.

· Judicial Authority trying penal provisions.

(II) There can be no absolute or unbridled power vested in any authority; may it be Executive or Quasi Judicial or Judicial. The discretion has to be subject to reason and the law.

(III) The words, "as he deems fit" cannot be viewed myopically and thereby be exaggerated in isolation. The intent of legislature was surely not to render absolute powers to the Collector of Customs under section 195 of the Act to pass orders based entirely on his whims.

(IV) The authority so vested in the Collector of Customs under Section 195 of the Act, is to be based on the objective legal criteria, which is to be germane to the functions, scope and limit of his authority provided under the Act.

(V) Executive Authority of the Collector of Customs vested in him under Section 195 of the Act, is clearly distinct from the powers vested in the Collector (Appeals), who as a statutory forum of appeal under section 193 of the Act hears appeals against decision of subordinate Custom Officers.

(VI) The powers of the Collector of Customs under Section 195 of the Act, to reopen cases decided by subordinate Customs Officers cannot transgress and encroach upon the jurisdiction of the Collector (Appeals), adjudicating appeals against the said decisions under Section 193 of the Act.

(VII) Impugned action of the Collector of Customs to quash the Order-in-Original when the same was pending adjudication in appeal before the Collector (Appeals), a separate statutory forum of appeal, was clearly illegal, void and surely without lawful authority.

(VIII) The authority of the Collector of Customs as provided under Section 195 of the Act, are revisional powers, vested to supervise actions of subordinate Custom Officers, which could be invoked in cases where the following conditions precedent are fulfilled;

There should be a decision of a subordinate Custom Officer, The said decision of the subordinate Customs Officer should lack legality or propriety, The decision of the subordinate Customs Officer should have been passed within two years of it being examined by the Collector of Customs, and

In cases where confiscation of goods or increase in duties and taxes from taxpayer is to be sought, the Collector of Custom should serve a notice upon the person, who is to be affected by the proposed decision.

(IX) The authority of FBR and the Collector of Customs to 'reopen' cases decided by subordinate Customs Officers under section 195 of the Act, is not a coercive tool, rather it is a corrective tool to ensure proper administration of taxation; preventing loss of duties and taxes on the one hand, and to avoid harm of excess recovery of duties and taxes by the Revenue from the taxpayers, on the other hand.

(X) The Collector of Customs can invoke his authority under section 195 of the Act, in cases where the four conditions precedent are fulfilled. The only exception to this rule is in cases, where the matter is pending adjudication before any appellate forum provided under the Act.

(XI) Where the allegation of 'mala fide' asserted has not been narrated with particularity, expressly specifying the name of the maker, the mode and manner of the alleged tainted action.

(XII) A purely factual dispute is beyond the jurisdiction of High Court vested under Section 196 of the Act. [p. 2139] K

Messrs POF Wah Cantt's case C.P. No.952 of 2012; Messrs Pak Suzuki Motor's case 2006 PTD 2237; Messrs Shah Taj Sugar Mills' case 2009 PTD 1544; Messrs Abbasi Enterprises' case 2008 PTD 2025; Messrs Frontier Ceramics' case PTCL 200(sic) CL 356; Messrs Kapron Overseas' case 2010 PTD 465; Messrs Super Asia's case 2008 PTD 60; Messrs Tripple M's case PLD 2006 SC 209; Associated Industries' case 2014 PTD 552; Messrs Zarghoon Zarai Corporation's case 2006 PTD 534; Messrs S. T. Enterprises' case 2009 PTD 467; Messrs Sikandar Enterprises' case 2008 PTD 1968 and Sunny Trader's case 2009 PTD 281 rel.

Zahid Idrees Mufti for Petitioner.

Qazi Jawad Ehsanullah for Respondents.

Date of hearing: 15th July, 2015.

2015 P T D 2572

[Peshawar High Court]

Before Lal Jan Khattak and Qalandar Ali Khan, JJ

MUJAHID OIL REFINERY (PVT.) LTD.---Petitioner

Versus

DIRECTOR I&I INLAND REVENUE and others---Respondents

W.P. No.249-A of 2015, decided on 2nd July, 2015.

Income Tax Ordinance (XLIX of 2001)---

----S. 177---Federal Excise Act (VII of 2005), Ss. 45 & 46---Sales Tax Act (VII of 1990), S. 38---Constitution of Pakistan, Art. 199---Constitutional petition---Universal Assessment Scheme---Selection for audit---Calling of books of accounts---Petitioners were Income Tax Assessees and they were aggrieved of selection of their cases for audit---Validity---Income Tax Ordinance, 2001, had nowhere indicated that mere selection of a taxpayer for audit and calling of books of accounts to verify version declared in his return under Universal Self-assessment Scheme was the main theme of Income Tax Ordinance, 2001, would cause any injury/prejudice to taxpayer---Universal Assessment Scheme could not be imagined as free from verification and check---Return filed under such scheme could not be considered as a sacrosanct document not subject to any verification or check---No blanket immunity from verification and check through audit could be extended to taxpayers in a developing country like Pakistan, where tax fraud and evasion were rampant and order of the day---When the concerned authorities acted in accordance with law and the reasons were enumerated in the notices in question, no prejudice was caused to petitioners by mere selection of their cases for audit---Sufficient legal safeguards were available to petitioners against use of powers in an arbitrary manner---High Court declined to interfere in the matter as records of petitioners had already reached the tax authorities---Petition was dismissed in circumstances.

Messrs OMV Pakistan Exploration v. Commissioner Inland Revenue 2013 PTD 1620 ref.

Messrs Chenone Stores Ltd. through Executive Director (Finance Accounts) v. Federal Board of Revenue through Chairman and 2 others 2012 PTD 1815 and Northern Bottling Company (Pvt.) Ltd. Industrial Estate Peshawar v. Federation of Pakistan 2013 PTD 1552 rel.

Mansoor Usman Awan for Petitioner.

Zahid Idrees Mufti and Khurram Ghias Khan for Respondents.

Date of hearing: 2nd July, 2015.

2015 P T D 116

[Balochistan High Court]

Before Qazi Faez Isa, C.J. and Muhammad Ejaz Swati, J

MUHAMMAD AKBAR through Attorney

Versus

GOVERNMENT OF PAKISTAN and 2 others

Constitutions Petition No.506 of 2010, decided on 26th August, 2014.

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

----Ss. 156, 179, 181, 193 & 196---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability--- Alternate remedy---Laches, principle of---Confiscated goods, return of---Scope--- Petitioner was searched by the customs authorities and foreign origin gold was recovered from him but he was acquitted from the charge---Contention of petitioner was that customs authorities were bound to return the seized gold subject to payment of customs duty---Validity---Gold was seized by the customs authorities on 20-1-1994 but present constitutional petition had been filed after the lapse of more than 16 years which was hit by principle of laches---Petitioner had not approached the customs authorities which was an adjudication authority for the matter in dispute---Appeal and revision had been provided under Ss. 193 & 196 of Customs Act, 1969 but same had not been availed by the petitioner---Petitioner had alternate and efficacious remedy by approaching the concerned forum available in the hierarchy of Customs Law---Article 199 of the Constitution was not meant to short-circuit the statutory proceedings---Constitutional jurisdiction might be exercised where impugned order was without jurisdiction or apparently contrary to law or was result of miscarriage of justice---Petitioner had not assailed any such order of adjudication authority and present constitutional petition was not maintainable---Constitutional petition was dismissed in limine.

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

----Ss. 156, 179 & 181---Confiscation of goods, adjudication of---Trial Court, powers of---Scope---Powers of Trial Court were restricted to the trial of the accused and adjudication of confiscated goods would exclusively fall within the domain of customs authorities for which Trial Court had no jurisdiction.

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

Zahoor Ahmed Baloch and Najam-ud-Din Mengal for Petitioners.

Date of hearing: 17th July, 2014.

2015 P T D 1080

[Balochistan High Court]

Before Muhammad Kamran Khan Mulakhail and Mrs. Syeda Tahira Safdar, JJ

COLLECTOR OF CUSTOMS, through Additional Collector of Customs

versus

Messrs HAJI BALLOW KHAN and another

Custom Reference Application No.7 of 2013, decided on 10th March, 2015.

Customs Act (IV of 1969)---

----Ss. 194C, 194 & 196---Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006, R. 4---Procedure of Appellate Tribunal---Interpretation of S. 194C of the Customs Act, 1969---Judicial and administrative powers of the Chairman---Constitution of Benches---Exercise of discretion by Chairman---Cases of urgency / exigency---Scope---Question before the High Court was "whether Chairman of the Appellate Tribunal, without constituting a two-member bench in terms of S. 194C of the Customs Act, 1969 had the jurisdiction to decide the matter as a Single Member bench in cases of urgency"---Held, that while S. 194 of the Customs Act, 1969 postulated and defined the powers of the Federal Government for constituting the "Appellate Tribunal, the appointment of judicial and technical Members and appointment of one of them as Chairman, thereof"; thereafter constituting benches was the prerogative of the Chairman of the Tribunal and procedure for distributing work among the benches had been provided under R.4 of the Customs, Excise and Sales Tax Appellate Tribunal (Procedure) Rules, 2006---Federal Government had no authority to constitute benches and distributing business among benches----While it was the sole discretion of the Chairman to distribute business among members of the Tribunal, but before doing so, he shall record reasons and after application of a judicial mind, entrust a case to any single member, subject to condition that only those matters shall be entrusted which have already been allotted to a bench of two members and said member / assignee was part of such a bench---Provision of S. 194C of the Customs Act, 1969 and Rules framed thereunder were silent about the discretion of the Chairman, as he was only empowered to the extent of administrative measures, but as far as judicial proceedings were concerned, powers of the Chairman and Member were equal, therefore, the Chairman could not himself retain a case without constituting a bench of two or more Members and in case if any Member due to any reason was not available; only then, before adjudicating the lis, the Chairman with reference to exigency and urgency of the matter and after recording reasons thereof, may hear the case, otherwise the order passed by him would be presumed to have been passed by a Single Member, which was not permissible in law---Impugned order passed by the Chairman was therefore coram non judice and not sustainable in law, and was set side---High Court directed the Chairman to reconstitute the bench and fix the matter for de novo hearing---Reference was answered, accordingly.

Director, Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali 2010 PTD 1024 rel.

Sher Shah Kasi, Deputy Attorney General, Syed Ikhlaq Shah, Standing Counsel-II and Muhammad Azam Law Officer Customs Department for Applicant.

Naseebullah Khan Achakzai for Respondents.

Date of hearing: 18th December, 2014.

2015 P T D 107

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Sarmad Jalal Osmany and Muhammad Ather Saeed, JJ

GHULAM HUSSAIN RAMZAN ALI

Versus

COLLECTOR OF CUSTOMS (PREVENTIVE), KARACHI

Civil Appeal No.427 of 2010 out of Civil Petition No.121-K of 2010, decided on 28th May, 2014.

(On appeal from the judgment dated 24-12-2009 of the High Court of Sindh at Karachi passed in Special Custom Reference Application No.49 of 2007)

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

----S. 196---General Clauses Act (X of 1897), S. 27---Reference to High Court, filing of---Limitation---Commencement of time for purposes of limitation---Scope---Judgment of Appellate Tribunal sent to counsel by registered post---Presumption that such judgment was served---Time for filing reference before High Court would start to run from the date of service of post---Appeal, in the present case, was dismissed by Appellate Tribunal on 17-2-1998, and record showed that judgment had been dispatched to the counsel from office of Appellate Tribunal on 26-2-1998 through registered post---Even otherwise counsel moved first application for supply of copy of judgment on 2-5-1998, i.e. almost seventy days after the appeal had been heard and dismissed---Second application was moved by the counsel after almost 13 months on 5-3-1999, and third application was moved after more than three years on 11-6-1999---Gross negligence was exercised by the counsel in not bothering for at least 70 days to find out as to why the decision had not allegedly reached his office---Reference filed before the High Court on 16-2-2007 in such circumstances was hopelessly time-barred---Appeal was dismissed accordingly.

Raja Kumari v. P. Subbarama Naidu AIR 2005 SC 109 = (2004) 8 SCC 774 ref.

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

----S. 158---Power of customs authorities to search baggage of a transit passenger---Scope---Under S. 158 of Customs Act, 1969, Customs Authorities had the jurisdiction to search the baggage of a transit passenger when he was leaving the customs station.

(c) Void order---

----Challenge to a void order---Limitation---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.

Messrs Blue Star Spinning Mills Limited v. Collector of Sales Tax and others 2013 SCMR 587 ref.

Sohail Muzaffar, Advocate Supreme Court for Appellant.

Raja Muhammad Iqbal, Advocate Supreme Court for Respondent.

Wazir Muhammad, Assistant Registrar, Custom Appellate Tribunal, Islamabad along with Rana Azhar, Assistant Registrar, Custom Appellate Tribunal, Lahore on Court's Notice.

Date of hearing: 28th May, 2014.

2014 P T D 525

[Supreme Court of Pakistan]

Present: Sarmad Jalal Osmany and Muhammad Ather Saeed, JJ

AMJAD QADOOS

Versus

CHAIRMAN, NATIONAL ACCOUNTABILITY BUREAU, (NAB), ISLAMABAD and others

Civil Petition No.669 of 2014, decided on 13th June, 2014.

(On appeal against the judgment dated 17-4-2014 passed by Peshawar High Court, Peshawar in Writ Petition No. 185-A of 2014)

Income Tax Ordinance (XLIX of 2001)---

----S. 227(2)(3)---National Accountability Ordinance (XVIII of 1999), S.3---Tax Officer alleged to have acted unlawfully---Investigation/ prosecution of such Tax Officer by National Accountability Bureau (NAB)---Whether permission of Federal Board of Revenue was required---Section 227(3) of the Income Tax Ordinance, 2001 provided that acts done by officials of the Federal Board of Revenue were protected to the extent that no inquiry could be initiated against such officers in respect of their official acts without the permission of the Board---Wherever the officials of the income tax department or of any other agency did any act in their official capacity in furtherance of the objectives of the legislation which gave them the power to do so, such acts should remain protected---Such protection, however, could only be extended to legitimate acts i.e. those done in good faith, bona fidely and in the interest of the State and not to acts which were allegedly unlawful---Where a Tax Officer did an act which was allegedly unlawful, e.g. issuing/authorizing bogus and fraudulent tax refunds, then such protection was not available to him and NAB Authorities would not need permission from Federal Board of Revenue before initiating an inquiry into the conduct of such official.

Kamran Murtaza, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Petitioner.

Akbar Tarar, Additional P.-G. NAB and Saeed Akhtar, Assistant Director NAB, Khyber Pakhtunkhwa for NAB.

Syed Zubair Shah, D.C. I.R. for FBR.

Salman Aslam Butt, Attorney-General for Pakistan on Court's Notice.

Date of hearing: 13th June, 2014.

2015 P T D 619

[Supreme Court of Pakistan]

Present: Jawwad S. Khawaja, Iqbal Hameedur Rahman and Mushir Alam, JJ

COMMISSIONER INCOME TAX

versus

HABIB BANK LIMITED AND ANZ GRINDLAYS BANK PLC

Civil Appeals Nos.1956 to 1958 of 2006, decided on 14th March, 2014.

(Against judgments dated 3-4-2004 and 26-3-2004 of High Court of Sindh at Karachi, passed in C.Ps. Nos. 1600 and D-1727 of 1994)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 17 & 32---Interest on securities of the Federal/Provincial Government---Exempted from tax---Method of accounting for computation of income---Method regularly adopted by assessee---Respondent-Banks filed their returns of income tax for the relevant assessment years declaring interest on Government securities on "receipt basis"---Declaration so made was accepted by assessing authority---Assessments were framed and orders were passed treating the same as a past and closed transaction---Subsequently assessing authority issued notices to the banks to show cause as to why the assessments carried out earlier not be opened and revised---Legality---Section 32 of Income Tax Ordinance, 1979 provided an exception to the computation of income including interest on any securities of the Federal Government or a Provincial Government received by an assessee in any income year---Banks were justified in adopting the method of accounting which was hybrid and had been consistently used by the banks since long---Appeal filed by assessing authority was dismissed accordingly.

(b) Estoppel---

----No estoppel against the law.

(c) Constitution of Pakistan---

----Arts. 189 & 201---Law enunciated by the High Courts and the Supreme Court---Binding precedent---Law enunciated by the High Courts under Art. 201 of the Constitution became a binding precedent for all the forums within the Province---Law enunciated by the Supreme Court under Art. 189 of the Constitution became binding precedent for all forums in the country.

Akhtar Ali Mahmud, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellant.

Salman Iqbal Pasha, Advocate Supreme Court for Respondent.

Date of hearing: 14th March, 2014.

2015 P T D 1010

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Amir Hani Muslim and Ejaz Afzal Khan, JJ

AL-HAMZA SHIP BREAKING CO. and 14 others

versus

GOVERNMENT OF PAKISTAN through Secretary Revenue Division, Ministry of Finance, Islamabad and others

Civil Appeals Nos.2535 to 2538 of 2001 and 1780 to 1790 of 2002, decided on 14th January, 2015.

(Against the judgment dated 5-10-1999 of the High Court of Balochistan, Quetta passed in Constitution Petitions Nos.632, 665, 807, 808, 68, 70, 101, 102, 72, 103, 70, 257, 242, 69 and 328 of 1999)

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

----S. 25-B [since repealed]---S.R.O. (K.E.)/98 dated 31-10-1998---Fixation of value of imports---"Import Trade Price"---Authority and discretion of customs department to fix the "Import Trade Price"---Scope---Valuation of vessels---Appellant-companies were importers engaged in the business of importing vessels for the purposes of breaking up and scrapping---Appellant-companies entered into different agreements on various dates for the importation of vessels for scrapping---Sale prices of the ships were declared per the invoices and the bills of entry, however such prices were less than the "Import Trade Price" fixed by the customs authorities---Subsequently appellant-companies presented certain invoices to customs authorities as evidence requesting them to decrease the "Import Trade Price" of vessels as their prices had declined in the international market, but such request was rejected---Validity---After appellant-companies had presented invoices/evidence to customs authorities about the decline of prices of vessels, a decision by the Controller Valuation was required as per parameters of S. 25B of Customs Act, 1969---Import Trade Price was generally valid for a period of three months, but in cases of abnormal fluctuation of plus or minus 10%, Import Trade Prices were to be revised upward or downward forthwith as and when such fluctuation took place---Controller Valuation had been delegated the authority to decide matters on the basis of the parameters provided under S. 25B of the Customs Act, 1969---Said parameters made it mandatory for the Controller to revise the Import Trade Price as soon as at least two invoices had been filed showing a fluctuation of more than 10% of the Import Trade Price---Controller, in the present case, received as many as 10 different invoices by appellant-companies showing that prices had fallen by an average of about 15%, but he still failed to revise the Import Trade Price, which was clear violation of the parameters under S. 25B of the Customs Act, 1969---Instead of revising the Import Trade Price to a reasonable figure between the minimum and the maximum prices, Controller demanded Bank Certificates and Bills of Entry from appellant-companies as evidence which were not requirements as per parameters provided under S. 25B of the Customs Act, 1969---Appellant-companies did provide Bank certificates and Bills of Entry but the Controller still did not revise the Import Trade Price---Life of an Import Trade Price notification was 3 months generally---Customs authorities did revise/reduce the Import Trade Price of vessels through a notification after a delay of about 8 months, but by such time the previous Import Trade Price notification had outlived its utility---Such (belated) decrease in Import Trade Price also did not commensurate with the price decline (in the market)---Furthermore, the appellant-companies were denied even such partial relief of revised Import Trade Prices since their Bills of Entry had been filed prior to the date of notification---Supreme Court remanded the cases to the customs authorities for fresh determination, not on a case by case approach, but by a generalized approach which was in line with the spirit of S. 25-B of the Customs Act, 1969, [since repealed] as it was in place at the relevant time---Appeals were disposed of accordingly.

(b) Statutory functionary---

----Decision by a statutory functionary on the basis of a direction by a superior officer was a nullity.

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

----S. 25-B [since repealed]---Fixation of value of imports---Legislative intent behind introduction of S. 25-B of the Customs Act, 1969 [since repealed]---Enactment of S. 25-B of the Customs Act, 1969 was an attempt to curtail arbitrary or mala fide decision making by individual customs officers in a wide range of cases---Customs officers, in some cases, did exercise their powers for the attainment of collateral objectives unknown to the law---Such objectives may be personal financial gain or enhancement of career prospects by collecting extra revenue for the Government in violation of the law---Neither was permissible---Presumably with a view to overcoming such problem the (erstwhile) Central Board of Revenue (CBR) transferred the power to fix values of goods from individual customs officers to the Board itself, or someone nominated by it, so as to obtain uniformity and consistency---Underlying idea, quite clearly, was to restrain arbitrariness and not to encourage it.

(d) Tax---

----Collection of tax---Tax had to be collected in accordance and only in accordance with law.

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

----S. 25-B [since repealed]---Fixation of value of imports---Parameters provided under S. 25-B of the Customs Act, 1969---Scope and purpose.

Following procedural safeguards were introduced into the system by the parameters provided under S. 25-B of the Customs Act, 1969 in order to ensure transparency:--

(i) The criteria for decision making were laid down. This was a rational approach which contemplated the provision of a specific justification for the revision of prices. The time period for the life of a notification was specified, both originally as well as from time to time. The general life of a notification was stated to be about three months but in cases of sharp fluctuations of plus or minus 10% the revision was to take place forthwith.

(ii) The basis for revision was specified. A minimum of two invoices was required to trigger off the price revision mechanism to deal with international price fluctuation. Commodity prices fluctuated not merely on a month to month, week to week, day to day, but even on an hourly basis. Obviously it was not possible to track prices with absolute precision but a reasonable endeavour had to be made and this was sought to be achieved by the parameters.

(iii) In order to ensure transparency it was made mandatory that Import Trade Prices would not be fixed without consultation with the concerned registered trade bodies. This was a sensible and pragmatic approach. Since a general fixation of prices was being made it was not practicable to give a hearing to each and every individual importer. Accordingly, the registered trade body representing importers of those items was conferred the right of consultation. Thus the principles of natural justice were adhered to.

(iv) It was made clear that the jurisdiction conferred under S. 25B of the Customs Act, 1969, was not meant to be exercised once and for all and thereafter set aside. It was mandatory to exercise it "from time to time" so as to ensure and grant protection both to importers as well as the exchequer. In the event that prices had risen it was mandatory to increase the Import Trade Prices and in the event that they had declined a corresponding reduction had to be made. Failure to do so would invalidate the notification.

(f) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of the High Court---Scope---Questions of disputed fact---Generally the High Court in the exercise of its constitutional jurisdiction did not decide questions of disputed facts, but this did not mean that decisions which were manifestly arbitrary, based on no evidence, or contrary to the record and not justified by law would be upheld.

Khalid Anwar, Senior Advocate Supreme Court for Appellants (in all appeals).

M. S. Khattak, Advocate-on-Record for Appellants (in C.As. 1780 to 1790 of 2002).

Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.1 (in all appeals).

Syed Arshad Hussain Shah, Advocate Supreme Court for Respondent No.2 (in all appeals).

Raja Muhammad Iqbal, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record and Tausif Aman, Assistant Collector, Gadani for Respondents Nos.3 to 5 (in all appeals).

Anwar Kamal, Senior Advocate Supreme Court as Amicus curiae.

Date of hearing: 27th November, 2014.

2015 P T D 1100

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Amir Hani Muslim and Ejaz Afzal Khan, JJ

MUHAMMAD AMIN MUHAMMAD BASHIR LIMITED

versus

GOVERNMENT OF PAKISTAN through Secretary Ministry of Finance, Central Secretariat, Islamabad and others

Civil Appeal No.214 of 2005, decided on 24th November, 2014.

(Against the judgment dated 14-9-2004 of the High Court of Sindh, Karachi passed in C.P. No.D-511 of 1992)

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

----Ss. 25 & 25-B---S.R.O. 356(KE) dated 29-10-1991---Fixation of value of imports---Principles---Customs authorities---Discretion in valuation of goods, exercise of--- Scope--- "Import Trade Price"--- Appellant-company entered into a contract with a foreign-company for the importation of sugar from Thailand at a price of US $ 292.50 per metric ton---Customs Department issued a notification, S.R.O. 356(KE) dated 29-10-1991 purportedly fixing the "Import Trade Price" (ITP) of sugar imported from Thailand at US $ 331 per metric ton---On arrival of the consignment the appellant-company filed Bill of Entry declaring the value of the consignment at the contract price---Customs authorities disregarded the claim that the duty should be fixed on the contract price and imposed duty on the "Import Trade Price" value of US $ 331 per metric ton---Legality---Section 25-B of the Customs Act, 1969 (as was in force then) authorized the Central Board of Revenue, or an officer authorized by it, to fix the price of imported goods at such rate as it deemed fit---On basis of said section, Customs Department had issued the notification in question purportedly fixing the "Import Trade Price" (ITP) of sugar imported from Thailand---Section 25 of the Customs Act, 1969 provided the basis on which the value of goods which were imported or exported had to be fixed---Said section (as was in force then) was based on the concept of "normal value" which, as defined, was the value of goods denoted by contracts between buyers and sellers which reflected arm's length transactions between independent buyers and sellers operating in the open market---Notwithstanding the very wide language used in S. 25-B of the Customs Act, 1969, the powers exercisable by the Central Board of Revenue thereunder were to be limited and constrained by S. 25 of the Customs Act, 1969, which was the substantive section of law for the fixation of prices---Central Board of Revenue did not have and could not be allowed to have unfettered discretion---Exercise of any discretionary power must be rational and have a nexus with the objective of the underlying legislation---Customs authorities had fixed the "Import Trade Price" of sugar imported from Thailand by relying on an invoice for sugar imported from another country of origin---For carrying out valuation of imports on a realistic basis it must be founded on the prevalent price at the place of origin of the goods, and not on the basis of prices prevalent in another country---Said criterion had clearly been violated in the facts of the present case---Determination of the "Import Trade Price" should have nexus not merely with the price at the place of the origin of goods but also with the relevant time---International prices of commodities varied hugely with the passage of time---Customs authorities in the present case had based the "Import Trade Price" of sugar based on prices prevailing nine months prior to the arrival of the consignment, which was clearly defective---More realistic and reasonable time period should have been utilized for such purpose---Impugned notification, S.R.O. 356(KE) dated 29-10-1991 purportedly fixing the "Import Trade Price" (ITP) of sugar imported from Thailand at US $ 331 per metric ton was not valid in such circumstances and was struck down---Supreme Court remanded the case to the concerned department for fixation of price afresh in terms of S. 25-B of the Customs Act, 1969 as it was prevalent at the relevant time---Appeal was disposed of accordingly.

Phassco Hardware Company v. The Government of Pakistan PLD 1989 Kar. 621 approved.

(b) Legislation---

----Delegated legislation---Principles---Discretion, exercise of---Scope---Delegated legislation entitled the delegate to carry out the mandate of the legislature, either by framing rules, or regulations, which translated and applied the substantive principles of law set out in the parent legislation or by recourse to detailed administrative directions and instructions for the implementation of the law---Delegated legislation was intended to enforce the law, not override it, and it could be used to fill in details but not vary the underlying statutory principles---In case of conflict delegated legislation must yield to the legislative will, as it was below and not above the law---Minutiae could be filled in but the basic law could neither be added to nor subtracted from.

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

----S. 24A---Executive authority---Discretion, exercise of---Scope---When legislature conferred a wide ranging power, it must be deemed to have assumed that the power would be, firstly, exercised in good faith, secondly, for the advancement of the objects of the legislation, and, thirdly in a reasonable manner---Where the authorities failed to regulate their discretion by the framing of rules, or policy statements or precedents, it became mandatory for the courts to intervene in order to maintain the requisite balance for the exercise of statutory power.

Amanulla Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092 and Abid Hasan v. PIAC 2005 SCMR 25 ref.

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

----S. 25-B---Fixation of value of imports by customs authorities---Principles.

Following are the principles applicable when customs authorities fixed the value of imported goods at such rates as they deemed fit:--

(i) The first principle which could be laid down was that the exercise of power by customs authorities in fixing value of imports had to be based on concrete evidence. In other words there had to be evidence relating to the import of goods on the basis of which the valuation process was to be carried out. It was not open to the (erstwhile) Central Board of Revenue or the Controller of Valuation to exercise arbitrary power of valuation which were not rooted in hard evidence, or were essentially speculative in nature;

(ii) the second principle was that the evidence must be based, and linked, with the country of origin of the goods. This also was obvious as there were countries in which price levels were substantially higher or lower than those of other countries. Similar or apparently similar goods could be sold at widely different prices depending on, for example, the country of origin. If the valuation was to be carried out on a realistic basis it must be founded on the prevalent price at the place of origin of the goods;

(iii) the third principle was based on a recognition of the inherent fluctuation of prices of commodities, which varied sharply from time to time. Prices prevailing many months earlier could hardly be considered to be determinative of the current market price. Since prices may vary, not merely from month to month, but even day to day, it should be recognized that it may not be practicable to lay down a strictly applicable time frame. The general principle, however, could be enunciated that if market conditions had changed substantially then it was mandatory for the price fixing authority to take due notice of the same. Valuation of imported goods should be a good faith valuation which was based on factual evidence prevalent at the relevant time. Although it may not be possible or practicable to have an exact correspondence with the price at the precise time in question but there should be a reasonable correspondence or nexus with the relevant time. What such reasonable time would be was difficult to state in the abstract since it would vary depending on the nature of the goods in question. It could be one month or perhaps two or three months. The point was it should be a reasonable period given the facts and circumstances of the case, and;

(iv) the fourth principle was that the decision should be based on relevant facts and data and not on extraneous circumstances. Just as a decision which disregarded relevant data was liable to be struck down, similarly a decision based on irrelevant data would be equally open to objection.

Messrs Latif Brothers v. Deputy Collector Customs Lahore 1992 SCMR 1083 ref.

(e) Constitution of Pakistan---

----Arts. 184(3) & 199---Civil Procedure Code (V of 1908), Part VII [Ss.96-112]---"Judicial review" and "appeal"--- Distinction--- Appellate court essentially stood in the shoes of a Trial Court and re-examined the evidence as a whole---Nature of the jurisdiction in cases of judicial review was completely different, in that a constitutional court examined not merely the decision, but the decision making process in order to determine whether that was appropriate or not.

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

----S. 24A---Interpretation---Section 24A of the General Clauses Act, 1897, reiterates the principle that statutory power is to be exercised "reasonably, fairly, justly and for the advancement of the purposes of the enactment" and further clarifies that an executive authority must give reasons for its decision---Any action by an executive authority which is violative of said principles is liable to be struck down.

Khalid Anwar, Senior Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Appellant.

Kh. Ahmed Hassan, D.A.-G. for Federation.

Malik Itaat Hussain Awan, Advocate Supreme Court for Respondents Nos.2 to 4.

Date of hearing: 24th November, 2014.

2015 P T D 1457

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk, C.J., Gulzar Ahmed and Mushir Alam, JJ

DEPUTY DIRECTOR/COLLECTOR CUSTOMS INTELLIGENCE AND INVESTIGATION, PESHAWAR

versus

FARMAN ALI and others

Civil Appeal No. 9 of 2006, decided on 9th April, 2015.

(On appeal from the judgment of the Peshawar High Court, Peshawar, dated 25-3-2006 passed in W.P. No. 85 of 2000)

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

----Ss. 9-A & 13---Constitution of Pakistan, Art. 185(3)---Leave to appeal was granted by Supreme Court to consider; whether complaint mentioned in S. 9-A(6) of Central Excise Act, 1944, by which Special Judge, could take cognizance, was to be equated with "complaint" under S. 200, Cr.P.C. and thus procedure thereunder to be followed or charge sheet submitted by police officer under S. 173, Cr.P.C. as provided under S. 13(11) of Central Excise Act, 1944; whether in absence of express provisions in Central Excise Act, 1944, Central Excise Officer was precluded from registration of a case; whether High Court was correct in holding that in view of special procedure provided under S. 13 of Central Excise Act, 1944, for investigation of a crime, first information report could not be registered; whether registration of first information report could be declared illegal, when Central Excise Officer was empowered under S. 13(1) of Central Excise Act, 1944, to arrest a person without warrant and for investigation of a case to exercise powers conferred under Criminal Procedure Code, 1898, upon officer in charge of a police station; and whether Special Judge could not take cognizance of offences under S. 9-A(6) of Central Excise Act, 1944, upon complaint mentioned in S. 13(11) of Central Excise Act, 1944, even if first information report had been rightly held to have been registered without lawful authority.

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

----S. 13---Inquiry into offence---Procedure---Comprehensive procedure has been provided under S. 13 of Central Excise Act, 1944, for inquiry into an offence committed under Central Excise Act, 1944, right up to filing of complaint before Special Judge.

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

----S. 13(10)---Criminal Procedure Code (V of 1898), S. 154---Arrest and detention---Non-registration of FIR---Effect---Absence of FIR does not, in any way, take away or affect powers of Central Excise Officer to arrest an accused under Central Excise Act, 1944, to carry out inquiry into an offence and to file complaint before Special Court---Provision of S. 13(10) of Central Excise Act, 1944, in fact provides for its own Register called "Register for Arrest and Detention" in which details are to be mentioned---Form prescribed under Police Rules, 1934, for recording of FIR may not be used by Central Excise Officer for recording information regarding offence under Central Excise Act, 1944, its exclusion has no bearing on criminal proceedings.

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

----S. 13(11)---Criminal Procedure Code (V of 1898), Ss. 173 & 200---Complaint to Special Judge---Format---Nature of complaint to be filed by Central Excise Officer to Special Judge for trial of accused, has been equated with police report submitted by officer in charge of police station under S. 173, Cr.P.C.---Such complaint is not to be treated as the one filed under S. 200, Cr.P.C., it is in the nature of police report (Challan) submitted by police under Criminal Procedure Code, 1898, and has all the trappings of such police report and Trial Court has to proceed upon it accordingly.

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

----Ss. 9-A & 13---Arrest and detention---Inquiry into offence---Scope---Case registered against accused under Central Excise Act, 1944, was declared without lawful authority by High Court in exercise of its constitutional jurisdiction---Validity---Initiation of criminal proceedings, its investigation and trial was to be conducted in accordance with procedure laid down in S. 13 of Central Excise Act, 1944---Recording of information under S. 13(10) of Central Excise Act, 1944, in register of arrest and detention mentioning names of persons arrested, giving details of information regarding crime itself amounted to registration of a criminal case on the basis of which complaint could be filed before Special Court in the nature of police report under S.173, Cr.P.C.---Supreme Court modified judgment passed by High Court---Appeal was allowed.

Abdul Rauf Rohaila, Advocate Supreme Court for Appellant.

Isaac Ali Qazi, Advocate Supreme Court for Respondents Nos.1 and 2.

Waqar Ahmed Khan, Additional A.-G. Khyber Pakhtunkhwa for Respondent No.3.

Sohail Mehmood, DAG on Court's Notice.

Date of hearing: 27th January, 2015.

2015 P T D 1635

[Supreme Court of Pakistan]

Present: Jawwad S. Khawaja, Ejaz Afzal Khan and Maqbool Baqar, JJ

COMMISSIONER OF INCOME TAX, COMPANY ZONE, ISLAMABAD---Appellant

versus

MUSLIM COMMERCIAL BANK LTD.---Respondent

Civil Appeals Nos.1319, 1320 and 1321 of 2007, decided on 24th March, 2015.

(Against the judgment dated 12-1-2007 of the Sindh High Court, Karachi, passed in Income Tax Appeals Nos.269/99, 270/99 and judgment dated 24-1-2007 passed in Income Tax Appeal No. 272 of 1999)

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

----S. 65(2)---Constitution of Pakistan, Art. 185(3)---Leave to appeal was granted by Supreme Court to consider, whether on the facts and circumstances of the case, Income Tax Appellate Tribunal was justified in holding that requirement of S. 65(2) of Income Tax Ordinance, 1979, could not be fulfilled if administrative and legal approval for reopening of such assessment was obtained from Commissioner of Income Tax for assessment order passed by Inspecting Additional Commissioner Income Tax as Chairman of panel when IAC's consent for reopening was also there.

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

----Ss. 15, 17, 32 & 65(2)---Computation of income---Exceptions---Income from securities and business or profession of assessee, a Bank---Income Tax Appellate Tribunal had held that interest on securities was assessable as ordinary business income and not as a separate head of income under S. 17 of Income Tax Ordinance, 1979---Order passed by Income Tax Appellate Tribunal was maintained by High Court---Validity---Exception was provided under S. 32 of Income Tax Ordinance, 1979, for computation of income set out in S. 17 of Income Tax Ordinance, 1979, which included S. 17(1)(a) of Income Tax Ordinance, 1979---High Court had correctly held that Banks were justified in adopting method of accounting which was hybrid and had been consistently used by Banks---Various heads of income were enumerated in S. 15 of Income Tax Ordinance, 1979, for the purpose of charge of tax and computation of total income---Interest on securities and income from business were classified as separate heads, respectively under S.15(b) & (d) of Income Tax Ordinance, 1979---Charging section for interest on securities was S. 17 of Income Tax Ordinance, 1979, and on income from business or profession was S.22 of Income Tax Ordinance, 1979---Income from the two heads were to be separately assessed regardless of whether the interest on securities was earned as a part of business of assessee---Appeal dismissed.

Commissioner Income Tax v. Habib Bank Ltd. 2014 SCMR 1557 fol.

M. Bilal, Senior Advocate Supreme Court, Babar Bilal, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for appellant.

Shahid Hamid, Senior Advocate Supreme Court for Respondent.

Date of hearing: 24th March, 2015.

2015 P T D 1882

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk, C.J., Amir Hani Muslim and Ejaz Afzal Khan, JJ

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI and others

versus

AKHTER HUSSAIN and another

Civil Appeal No. 1549 of 2003, decided on 28th April, 2015.

(On appeal against the judgment dated 19-4-2003, passed by the High Court of Sindh, Karachi, in W.P. No. 16 of 2003)

Customs Act (IV of 1969)---

----Ss. 79(1), proviso & 205---Import of consignment---Bill of entry, amendment in---Scope---Upon arrival of consignment importer filed bill of entry along with a request under proviso to S. 79(1) of the Customs Act, 1969, on the back of the bill of entry, for carrying out 100% examination of the consignment for determination of the correct description, quantity, PTC Heading, etc.---Meanwhile the supplier abroad informed the importer that the clearing invoice was not correct and certain items had been missed or indicated incorrectly---Importer immediately applied to the customs authorities seeking amendment in the bill of entry, under S. 205 of the Customs Act, 1969---Customs authorities refused to amend the bill of entry contending that amendment sought in the bill of entry after its filing, fell within the termmis-declaration---Validity---Record showed that at the time of filing bill of entry, importer had made a request in terms of proviso to S.79(1) of the Customs Act, 1969, for examination of the goods, which request was allowed by customs authorities---Record further showed that within the stipulated time a formal application was made seeking amendment of the bill of entry---High Court had correctly allowed importer's application for amendment of bill of entry and directed customs authorities to finalize the goods being perishable---Appeal filed by customs authorities was dismissed accordingly.

Raja Muhammad Iqbal, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants.

Malik Muhammad Qayyum, Senior Advocate Supreme Court for Respondent No.1.

Hashmat Ali Habib, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondent No.2.

Date of hearing: 28th April, 2015.

2015 P T D 2026

[Supreme Court of Pakistan]

Present: Ijaz Ahmed Chaudhry and Iqbal Hameedur Rahman, JJ

COLLECTOR OF CUSTOMS, LAHORE and others

versus

Messrs S. FAZAL ILAHI AND SONS through Proprietor

Civil Appeal No. 1098 of 2007, decided on 30th June, 2015.

(On appeal against the order dated 1-12-2006 passed by the Lahore High Court, Lahore, in W.P. No.3726 of 2006)

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

----Ss. 25(4) & 81(4)---Customs Rules, 2001, R. 109---Value of imported goods---Provisional determination of liability by Customs department---Customs department failing to make final determination of liability (despite a lapse of more than one year) due to its own defaults---Effect---Provisional determination of liability not deemed to be final determination---Value of imported goods as shown in the bill of entry was found to be on the lower side by the Customs department---Consequently Customs department made a provisional assessment of the liability of importer and released the goods after obtaining post-dated cheques and indemnity bonds from the importer for the difference in liability on account of higher value of the goods claimed by the Customs department---Customs department contended that the importer could not deposit the required documents within one year in support of the price shown in the bill of entry and did not deposit any proof of payment of price of the imported goods, hence the department could not finalize the matter of liability within the stipulated period of one year; that in terms of S. 81(4) of the Customs Act, 1969, since the final determination of liability could not be made within the period of one year, the provisional determination was deemed to be the final determination of liability---Validity---Customs department after making a provisional assessment of liability in the present case did not proceed in the matter for the determination of final assessment even after a lapse of one year---Neither Customs department sent any notice or demand to the importer seeking corroboration or clarification with regard to any document nor was the importer confronted with any material to substantiate the higher value of the goods as claimed by the Customs department [in terms of S. 25(4) of the Customs Act, 1969 read with R. 109 of the Customs Rules, 2001]---Customs department, in such circumstances, could not use S. 81(4) of the Customs Act, 1969, as a tool to delay the making of final assessment, and consequently consider the provisional assessment as a final assessment---Such use of S.81(4) of the Customs Act, 1969, without affording the importer proper opportunity of contesting the provisional liability, and thus, depriving him of fair trial, could not be justified---Keeping in view the lapses and defaults on the part of the Customs department in the present case, the importer could not be penalized for the default caused by the department---Appeal filed by Customs department was dismissed accordingly.

Quetta Textile Mills Ltd. v. Federation of Pakistan and 2 others 1999 CLC 755; Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport, Sambrial and 2 others 2004 PTD 795; Collector of Customs, Appraisement, Karachi v. Messrs H. M. Abdullah and another 2004 PTD 2993; Collector of Customs (Appraisement), Karachi v. Messrs Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116; Messrs Trade International through Proprietor Habib-ur-Rehman v. Deputy Collector of Customs (Bank Guarantee Section) and 3 others 2005 PTD 1968; Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and 2 others 2006 PTD 1276; Sus Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan through Secretary Revenue Division/Chairman, Islamabad and 2 others 2011 PTD 235 and Messrs Crescent Art Fabrics (Pvt.) Ltd. through Managing Director v. Assistant Collector Customs and 4 others 2011 PTD 2851 ref.

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

----S. 81(4)---Provisional and final determination of liability by Customs Department---Section 81(4) of the Customs Act, 1969---Scope---Section 81(4) of the Customs Act, 1969, provided that if the final assessment was not completed within the period specified therein, then the provisional assessment shall become final---Said section had been provided as a safeguard to the benefit of the assessee/importer/exporter to save them from unnecessary harassment by Customs authorities by unnecessarily delaying their cases for an indefinite period on the pretext of making a final assessment.

Sh. Izhar-ul-Haq, Advocate Supreme Court for Appellants.

Abdul Ghaffar Mian, Advocate Supreme Court for Respondent.

Date of hearing: 30th June, 2015.

2015 P T D 2210

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Sh. Azmat Saeed and Mushir Alain, JJ

LUCKY CEMENT LTD.

Versus

COMMISSIONER INCOME TAX, ZONE COMPANIES, CIRCLE-5, PESHAWAR

Civil Appeals Nos. 150, 151 and 152 of 2006, decided on 10th July, 2015.

(Against the judgment dated 22-11-2005 of the Peshawar High Court, Peshawar passed in Income Tax Reference Nos.117, 118 and .119 of 2003)

Per Mian Saqib Nisar, J.

(a) Companies Ordinance (XLVII of 1984)--

----Ss. 15 to 28---Constitution of a company-Scope-Memorandum of Association---Articles of Association-Memorandum of Association and Articles of Association when read as a whole were the constitution of the company-Memorandum of Association provided and prescribed the object(s) and the purpose(s) for which the company had been established and constituted, with specific reference to the business and the avocations which it could conduct, carry on and undertake-While the Articles of Association were the organizational and governance rules of the company which primarily dealt with the management affairs.

(b) Companies Ordinance (XLVII of 1984)----

---Ss. 15 to 25-Company-Memorandum of Association---Scope--­Anything done by a company which was beyond the scope of its Memorandum of Association was ultra vires and thus could not be given any legal sanctity-Company could not engage in a business which was not fairly covered by any of its independent objects, or such objects which were ancillary and incidental to those for which a company had been created and its Memorandum of Association was duly recognized and accepted by the regulatory bodies meant for the incorporation of a company and oversight thereof.

(c) Companies Ordinance (XLVII of 1984)--

----Ss. 15 to 25-Company-Memorandum of Association---Main object of a company, interpretation of---Liberal interpretation by the court-Company may incorporate in its Memorandum of Association, besides the main object of the company and its ancillary purposes, certain other objects as well which may be independent of its main object/business-Company thus may have a primary object and purpose, but still there may also be several other objects mentioned in the objects clauses, and after proper construction of such objects, by resorting to the relevant rules of interpretation, it should be considered whether those were ancillary to the main object of the company or could be held to be independent of each other-Memorandum of Association of a company should be read and construed liberally and be given a wide meaning through literal interpretation of the clause---Since objects were considered to be the permissive activities which a company could undertake in order to do its business, the same should not be given a restrictive meaning---In any case, rigid construction of the Memorandum of Association, unless and until inevitable and insurmountable, must be avoided.

(d) Interpretation of statues---

----Prohibitory clause in a statute, interpretation of-Scope-Under the law of interpretation of statutes, a prohibitory clause, couched in the negative language should be construed and applied strictly---Court should assess and ascertain as to what was the real intent and object behind such a clause, what mischief it had to suppress, circumvent and curb--- However, such prohibitory clause should not be construed and interpreted to render any other specific provision/clause as nugatory, rather for all intents and purposes the rules of harmonious interpretation should be adhered and resorted to and all possible efforts should be made to save each and every provision of the statute.

Per Sh. Azmat Saeed and Mushir Alam, JJ. dissenting with Mian Saqib Nisar, J. [Majority view]

(e) Income Tax Ordinance (XXXI of 1979) [since repealed]---

---Ss. 30(2)(b), 15(d), (f), 22 & 30---Companies Ordinance (XLVII of 1984), Ss. 15 to 25---Public limited company-Income from business' or 'income from other sources', determination of---Memorandum of Association---Objects of a company, interpretation of---Public Limited Company (before commencing its business activities) using its surplus money/reserves to invest in various profitable schemes/banks-Question as to whether income/interest generated from such schemes/banks amounted to 'income from business' or 'income from other sources'---Main and primary object of the appellant-public limited company, in the present case, was to set up and run a cement factory---When the cement plant was under construction, and the business of the company had not yet commenced, the company used money lying in its reserves to invest in certain profitable schemes/banks through fund management arrangements-Company earned income/interest through the said schemes/banks-Assessing officer (Deputy Commissioner, Income Tax) assessed such income/interest so received by the company as 'income from other sources' under S. 30(2)(b) of the Income Tax Ordinance, 1979 [since repealed]---Appellate Tribunal upheld the decision of the Assessing Officer-Contention of company was that though the primary object and purpose of the company was to establish a cement factory, however since the Memorandum of Association of the company permitted investments to be made for the purposes of its (company's) business to generate income, therefore any income or interest earned and received through such investments should be taxed as 'income from business', as opposed to 'income from other sources'-Validity­[Per Sh. Azmat Saeed, J] Main object of the company in the present case as mentioned in its Memorandum' of Association was to install, establish and run a cement manufacturing plant---One of the clauses mentioned in the Memorandum of Association provided that company's object and purpose was also "to invest or otherwise deal with the money of the company in such manner as may from time to time be determined"---However a prohibitory clause was also mentioned in the Memorandum of Association which stated that "notwithstanding anything contained in the .... object clauses of .... Memorandum of Association, nothing [t]herein shall be construed as empowering the Company to undertake or indulge in the business of banking, finance, investment, leasing or insurance, directly or indirectly or any unlawful operations"---Said prohibitory clause stated in unequivocal terms that in spite of anything contained in any of the object clauses in the Memorandum of Association, nothing therein shall continue to empower the company to undertake or indulge in the business of inter alia investment-Such was the clear and unambiguous import and meaning of said prohibitory clause---Company, in the present case, could, thus, invest its money but such a transaction could not be deemed to be business of the company---Consequently, the income derived from such investment could not qualify as income from business and therefore must fall in the category of "income from other sources" in terms of S. 30(2)(b) of the Income Tax Ordinance, 1979 [since repealed]---[Per Mushir Alam, J] During the period or course of setting up of a factory or plant by the company, activity of investing surplus funds of the company and generating any sum, return or interest on such investment, could not be considered as "income from business" under S. 15(d) of the Income Tax Ordinance, 1979 [since repealed]---Company claimed that its surplus funds were employed in a proactive manner in order to generate additional fund by way of portfolio, fund and cash management venture---Such activity was carried out during the period when cement plant/factory was under construction, therefore, the company , could not be said to be carrying on any business at that point of time within the contemplation of S.22 of the Income Tax Ordinance, 1979 [since repealed]---In such circumstances the Appellate Tribunal was right in holding that such income/interest yielded from the investment of the surplus funds of the company fell under "income from other sources" i.e. S. I5(f) of the Income Tax Ordinance, 1979 [since repealed]---Such income was rightly assessed as 'income from other sources" under S. 30(2)(b) of the Income Tax Ordinance, 1979 [since repealed]---[Per Mian Saqib Nisar, J] [Minority view] Primary and main object of the company, in the present case, was to install, establish and run a cement manufacturing plant---Such object, was, however not the only object of the company, rather there were numerous other ventures which were permissible under the objects clause of the company (mentioned in the Memorandum of Association)---Some objects clauses mentioned in the Memorandum of Association were ancillary, but some were vividly and undoubtedly independent---One such independent object clause mentioned in the Memorandum of Association was that the company was empowered to, and one of its purposes and objects was "to invest or otherwise deal with the money of the company in such manner as may from time to ante be determined"---Said independent object clause made it clear that investment of the money of the company, surplus or otherwise, for the purpose of earning income, would be within the pail of permissible business activities detailed in the Memorandum of Association---Memorandum of Association of the company in the present case contained a prohibitory clause too which provided that "notwithstanding anything contained in the....object clauses of .... Memorandum of Association, nothing Wherein shall be construed as empowering the Company to undertake or indulge in the business of banking, finance, investment, leasing or insurance, directly or indirectly or any unlawful operations"---Said prohibitory clause did not prohibit the company from making any investment of its money and carrying on any activity having no nexus to its main object for generating income---Said prohibitory clause had been seemingly added purposely in the Memorandum of Association, as an extra precaution to eliminate any doubt that the company while misinterpreting any of its object clause might not undertake and indulge into such business which was expressly covered and fell within the prohibitory domain, thereof; but where business of the company was covered expressly by one or more than one of its lawful objects, and did not clearly and unambiguously fall within the prohibitory clause, it would be beyond the pail of the said prohibitory clause---Section 30(2)(b) of the Income Tax Ordinance, 1979 [since repealed] which dealt with 'income from other sources' was only applicable where the investment of money by a company had not been made as part of its business activities--- Where money had been invested by a company in its business, as in the present case, and profit was generated on such an investment, that profit shall, for all intents and purposes, be considered to be the profit earned from business and not from other sources---In the present case, amount of profit earned by the company from the investment made in the various schemes/banks was pursuant to its business activities and, therefore, such profit could not be termed to have been accrued from any other source so as to attract the application of S. 30(2)(b) of the Income Tax Ordinance, 1979 [since repealed] i.e. income from other sources---Appeal was dismissed accordingly.

The Commissioner of Income Tax, East Pakistan, Dacca v. The Liquidator, Khulna-Bagerhat Railway Company Ltd., Ahmadabad PLD 1962 SC 128 distinguished.

Tuticorin Alkali Chemicals and Fertilizers Ltd. v. Commissioner of Income Tax 1997 Supp. (1) SCR 528 = 1998 PTD 900; Commissioner of Income Tax v. Seshasayee Paper and Board Ltd. 156 ITR 543; Commissioner of Income Tax v. liquidator Khulna-Bagerhat Railway Company Ltd. PLD 1962 SC 128; Genertech Pakistan Ltd. v. Income Tax Appellate Tribunal of Pakistan 2004 SCMR 1319; CIT, Karachi v. Gelcaps (Pvt.) Ltd. 2009 PTD 331 and UCH Power (Pvt.) Ltd. v. Income Tax Appellate Tribunal 2010 SCMR 1236 ref.

(f) Words and phrases---

----"Notwithstanding"---Meaning. [p. 2227] K Black's Law Dictionary Ninth Edition ref.

Khalid Anwar, Senior Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Appellant.

Ghulam Shoaib Jally, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Respondent.

Date of hearing: 31st March, 2015.

2015 P T D 2596

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, Gulzar Ahmed and Maqbool Baqar, JJ

The FEDERATION OF PAKISTAN and others

Versus

Messrs DELTA INNOVATIONS LTD.

Civil Appeal No. 1125 of 2007, decided on 21st April, 2015.

(On appeal against the judgment dated 18-1-2005 of the High Court of Sindh, Karachi passed in C.P. No. D-516 of 2004)

Customs Act (IV of 1969)---

----S. 18---Pakistan Customs Tariff, Headings 87.11 & 87.14---S.R.O. 436(I)/2001 dated 18-06-2001---Parts/components imported for manufacture and assembly of motorcycle---Customs duty, determination of---Manufacturer in question, which imported such parts/components, contended that the same were amenable to customs duty @ 25% ad-voleram under PCT 87.14---Contention of customs authorities that customs duty on such components was 90% as prescribed under PCT 87.11---Validity---Consignments for parts/components imported for manufacture and assembly of motorcycle were amenable to customs duty @ 90% under PCT Heading 87.11, however vide S.R.O. 436(I)/2001 dated 18-6-2001, 30% exemption on such duty was provided---To avail the 30% exemption under the said S.R.O., a recognized assembler had to obtain an approved deletion programme from the Engineering Development Board (EDB), which programme was devised after a survey of the manufacturing facility by the Federal Board of Revenue, whereupon a survey certificate was issued---Amongst the various conditions prescribed under the said S.R.O., was the condition that the assembler/manufacturer shall chalk out an indigenization programme spreading over a maximum period of five years, within which period, it shall achieve such minimum indigenization of the manufacture of the vehicle as approved by the indigenization committee of the EDB, and that in case of any default in the indigenization programme, the components imported shall attract the (full) statutory duty chargeable on relevant vehicles---Supreme Court remanded the case to the Federal Board of Revenue and directed that the concession under S.R.O. 436(I)/2001 dated 18-6-2001, shall only be available to the manufacturer in question if it fully adhered to the terms and conditions therein---Order accordingly.

Dr. Farhat Zaffar, Advocate Supreme Court, Raja M. Iqbal, Advocate Supreme Court, Asaf Fasihuddin Verdak, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants.

Tariq Javed, Advocate Supreme Court for Respondent.

Date of hearing: 21st April, 2015.

2015 P T D 2642

[Supreme Court of Pakistan]

Present: Jawwad S. Khawaja, Gulzar Ahmed and Sh. Azmat Saeed, JJ

COLLECTOR OF CUSTOMS KARACHI and others

Versus

Messrs HAJI ISMAIL CO. and others

Civil Appeals Nos.1167 to 1175 of 2008, decided on 30th April, 2015.

(Against the judgment dated 2-4-2008 of the High Court of Sindh, Karachi passed in Spl. Customs Appeals Nos. 148 to 156 of 2001)

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

----S. 32---Import of consignment---Documentary evidence, lack of---Bill of lading---Appellate Tribunal rightly concluded that original documents such as bill of lading etc. were not provided to the Customs authorities by the importers; that importers provided photocopies of bill of lading, wherein the addresses of consignors/ consignees had been struck out with a marker with the result that co-relation between the bills of lading and the consignment under dispute could not be ascertained; that bills of lading which were of subsequent dates, had shown consignments exported from country "K" prior to the issuance of bills of lading; that importers had also failed to produce documentary evidence to show that the containers carrying the goods with the seal intact were exported from country "K" to country "J"---Conclusions arrived at by the Appellate Tribunal were proper and consistent with the record---Appeal was allowed accordingly.

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

----Ss. 194B & 196---Reference to High Court---Scope---Appellate Tribunal---Factual aspects of a case determined by the Appellate Tribunal, interference in---Appellate Tribunal was the forum meant for determining factual aspects of the case---High Court while exercising appellate jurisdiction under S. 196 of the Customs Act, 1969, was not free to embark upon an unfettered inquiry into factual aspects of the case which had been properly considered and decided by the Appellate Tribunal.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellants.

Muhammad Waqar Rana, Additional AGP on Court Notice.

Muhammad Saleem Thepdawala, Advocate Supreme Court for Respondents.

Date of hearing: 30th April, 2015.