1985 PLP 272 (PTD)

2. Whether in the facts and circumstances of the case the Tribunal was justified in law in holding that the original appeal for the charge year 1958‑59 obviously became in fructuous when the reassessment came to be made in respect of the, said charge year?" This reference relates to the assessment years 1955‑56, 1956‑57, 1957‑58, 1958‑59, 1959‑

60. Applicant is engaged in manufacture and sale of sweetmeats. The assessee was assessed to sales tax for the aforesaid assessment years under section 10(3) of the Sales Tax Act. In all those assessments the applicant was assessed on 50% of its sale and the same was taxed at the normal rate. The balance 50% of sales were held to be transacted in a restaurant. This 50% of the restaurant sale was again divided into half and half and the assessee was allowed exemption in respect of half of the later categories of sale on account of service charges and other half, was assessed at a lower rate of tax`'` as was applicable in the case of restaurant. All the aforestated assessments were re‑opened under section 28 by the Department on the ground that the exemption on account of service charges and tax at a lower rate had been wrongly allowed on 50% of the assessee's sale as the same was applicable to restaurant and hotels and not to sweetmeat shops and that the applicant was not entitled to such exemption, as it was not a restaurant. The Sales Tax Officer proceeded to reassess which was completed and appeal filed against it was dismissed by the Appellate Assistant Commissioner. He concluded that the applicant was not a restaurant and as such it was not entitled to exemption, which was allowed, and therefore, action under section 28 was proper. The assessee filed appeal against this order before the Tribunal where several pleas were raised contending that there was no escapement of the tax and no case for reassessment was made out under section

28. The question of limitation though raised was not pressed. It was also contended that the assessee had made a declaration. under M.L.R. 43/48 for the period beginning from 1954‑55 to 1958‑59 and, therefore, assessment could not be reopened. All these pleas did not find favour with the Tribunal and appeal was dismissed. In regard to assessment year 1958‑59 the original assessment was completed on 30th March 1963 against which appeal was filed before the Appellate Assistant Commissioner. This assessment was completed before the completion of the Income‑tax assessment. By a notice, dated 18‑6‑1965 this assessment was also re‑opened. under section 28, Sales Tax Act and reassessment was completed on 20th June, 1965 but the appeal filed against it came up for hearing earlier than the appeal filed against the original assessment. The appeal filed against reassessment was dismissed and the earlier appeal was held to be in fructuous because of the re assessment having been made and upheld in appeal. The Tribunal has confirmed this order in appeal. Mr. I.N. Pasha the learned counsel has contended that in view of the provisions of M.L.R. 43/48 the applicant had made declaration in respect of the aforestated assessment years and after due consideration the assessment was completed and, therefore, in view of the circular of Central Board of Revenue dated 20th December, 1958 the assessment for these years could not be re‑opened. Mr. Sheikh Haider, the learned counsel for the department has contended that the case has been reopened under section 28 of the Sales Tax Act as the Sales Tax Officer while assessing the income had charged at a lesser rate. According to the learned counsel this is not a case where the circular will apply as there is no question of any suppression or evasion of tax. At this stage it will be proper to reproduce para. 2 of the circular which reads as follows: "(2) Where a tax‑payer has filed a revised return or consolidated statement showing his excess income correctly it would be taken to represent all the income earned by him from all sources including suppression, if any, of taxes evaded or collected from customers but not paid to Government. Thus, sales tax assessments or proceedings for the recovery of excise or custom duty, etc. would not be started or re‑opened, as the case may be, against such persons for the relevant period except that the revaluation proceedings already pending with the valuation Branch of the Customs Department would not be affected. Similarly, assessments under the Estate Duty Act, which have already been finalised would not be re‑opened and any statement made under Martial Law Regulation No. 43, as amended, would not be utilised in completing pending estate duty assessments. This is of course; on the assumption that all income and gains from such suppression or non‑payment of taxes, etc., are now included in the revised return or consolidated statement of the tax‑payers concerned." A perusal of para 2 of the circular makes it clear that where a revised return has been filed by an assessee showing an excess income then it would cover all the income earned by the assessee from all sources. Such sources include income, which arose from suppression or evasion of tax or having collected from the customers and not paid to tile Government. The incidents of evasion and concealment mentioned here are not exhaustive but are inclusive of suppression and non‑payment after having collected it. This clearly indicates that it covers all and every source of income and evasion, which will include suppression also. The object of this circular was to give finality to such declarations which were made showing excess income correctly and once it was accepted the assessee was to start with a clean slate. The contention of the learned counsel for the respondent that it was not a case covered by para. 2 as it was due to change of opinion that the case was reopened does not seem to be justified. The assessee had filed a return claiming the income to be partly income of restaurant and on that representation it had claimed exemption and assessment at a lesser rate of tax. It was the overt act of the applicant to have made a claim, which was accepted by the Sales Tax Officer. This was a clear case of evasion and suppression of material facts by misrepresenting it to the Sales Tax Officer. Para. 2 contemplated that the declaration would include income and gains from all sources including suppression or non‑payment of taxes. No restricted meaning can be given to such a wide clause. The applicant had obtained relief by giving incorrect facts and making misrepresentation therefore, the income derived from such evasion will be covered by the declaration made under M.L.R. 43/48. Para‑. 2 clearly provides that the Sales Tax assessment in respect of the periods for which declaration has been made and of course accepted as correct, will not be reopened against such person for that period. In view of these facts we are of the opinion that the Sales.. Tax Officer was not competent to reopen the case under section

28. In the case of Commissioner of Sales Tax v. Cresent Pak Soap and Oil Mills Ltd. 1982 P T D 1 where in respect of declaration made under M.L.R. No. 32 of 1969 similar question arose following observation was made: "Thus, it is now an established proposition of law that a declaration made by an assessee under M.L.R. 32 in respect of his undisclosed income covers all excesses and duties evaded by the assessee and, therefore, the pure question of law referred to the High Court is to be answered in the affirmative because every evasion tax is covered by M.L.R 32 whether the said w evasion be, on account of false returns, made by the assessee or on account of misinterpretation of the provision of law." Reference can also be made to 1980 P T D 300 and 1979 (39) Taxation

56. The learned counsel for the applicant further contended that notice under section 28 is illegal as period of 35 days was not allowed to file the return. This objection has been raised on the basis of judgment of our Court reported in Commissioner of Sales Tax (East) Karachi v. Messrs Chaudhry Farzand Ali 1983 P T D

271. Mr. Sheikh Haider. the learned counsel has contended that this objection was not raised at any stage by the applicant and, therefore, it cannot be pressed at this stage. A perusal of the statement of case submitted by the Tribunal shows that re‑opening of assessment under section 28 was challenged on several grounds but no such specific plea, was raised by the applicant. In this regard the learned counsel for the assessee has referred to Scindia Steam Navigation Company v. Commissioner of Income Tax (1959) Tax (III‑195) and contended that he is entitled to raise alternate arguments. In that case while dealing with the scope of section 66 of the Income Tax Act, which is similar to section 17(1) of the Sales Tax Act the following, observation was made: "There is no doubt that on a reference to the High Court a party is not entitled to raise a new question of law not covered by the question. But that does not canvass before the Income tax Tribunal in a particular manner, the parties are debarred to canvass the same question of law on different set of arguments. A distinction has to be drawn between those cases where new question of law for the first time is raised in the High Court and those cases where the question of law is the same which is referred by the Tribunal, but an alternative argument is advanced though not advanced before the Income‑tax Tribunal, based on the same facts, relevant and helpful for the answer of the question referred to the High Court." The question of law referred by the Tribunal is sufficiently wide. The applicant has not raised any new question of law. It has challenged the validity of re‑opening the assessment. An alternative ground has been raised that notice under section 28 was not legal and proper as 35 days time was not allowed to file the return. The admitted position is that the Sales Tax Officer had not allowed 35 days for filing the return. This objection is merely an alternative argument to support the main plea that the notice under section 28 initiating the proceeding of assessment was illegal and, therefore, reopening of the assessment was not legal and justified. Where legality of proceeding has been challenged from the very beginning it will be unjust to reject the alternate plea on a restricted and technical ground. We are of the view that the notice under section 28 was not proper but as the applicant filed the return and did not specifically object on the ground of insufficiency of time at any stage, this objection shall be deemed to have been waived. For these aforestated reasons our answer to question No. 1 is in the negative. As regards to question No. 2 since the Tribunal's order is not justified in law original appeal for the charge year 1958‑59 cannot be treated as in fructuous. Reference answered. M. B. A. Reference answered accordingly.