1982 PLP 1 (PTD)

MUHAMMAD ZAHOORUL HAQ, J.‑The opponent is an assessee of the Sales Tax Department and is a manufacturer of toilet and washing soap. The Sales Tax Officer did not accept the sales version of the opponent as disclosed on the basis of excise record but made his own estimate for the period of 1‑1‑1961 to 30‑6‑1961 and 1‑7‑1961 to 30‑6‑62 which 2 periods are referable to I. T. R .35/70. Similarly for the periods of 1‑7‑1962 to 30‑6‑1963. Estimate of sales were made which is referable to S. T. C. 49/71 Then again the Sales Tax Officer made an estimate of sales in respect of the period from 30‑6‑1964 which is referable to S. T. C. 50/71. The opponent was not satisfied with the estimate of sales and therefore he filed separate appeals before the Appellate Assistant Commissioner (Sales Tax), who accepted the appeals and set aside the assessment and held that the value of the goods have to be determined under section 4 of the Central Excises and Salt Act, 1944 and that the sale price of the goods was, as provided in the amended sect ion 2(16) of the Sales Tax Act, the value determined under section 4 of the Central Excises and Salt Act, 1944 and the same was to be treated as the value of the goods for the purpose of sales tax determined under section 3 of the said Act. There is no dispute about sales tax having been paid on the value of the goods as determined under section 4 of Excises and Salt Act. 2: A detailed order giving the reasons was passed in respect of the period of 1‑1‑1961 to 30‑6‑1963 while for the other two periods ending with 30‑6‑1963 and 30‑6‑1964 short orders have been passed, relying upon the earlier order. The said orders were however set aside in appeals. The Sales Tax Officer did not feel satisfied with the orders of the Appellate Assistant Commissioner of Sales Tax and filed separate appeals. The two appeals in respect of the period of 1‑1‑1961 to 30‑6‑1963 were dismissed by the Appellate Tribunal on the basis that the assessee/opponent had filed excess income return for the charge year 1962‑63, covering the account period relating to the Sales Tax assessment of 1‑1‑1961 to 30‑6‑1963. The following order was passed : "In the circular letter dated 28‑6‑1969 of the Central Board of Revenue in connection with the Martial Law Regulation 32 it has been stated that processing of the excess income under that Martial Law Regulation will cover the evasion of all taxes and duties. It includes evasion‑ of sales tax as well. As the excess income declaration in this case for that period has been processed these departmental appeals have lost their merit and must be dismissed." The other 2 appeals of the Sales Tax Officer were also decided on the same basis.

3. The Commissioner of Income‑tax moved the Appellate Tribunal for referring the following point of law to the High Court :‑ "Whether on the fact and in the circumstances of the case the Income tax Tribunal 'was justified to hold that the assessee's declaration under‑ M. L. R. 32 covered also such taxes and duties as were evaded on account of misinterpretation of a provision of law and that the departmental appeal in such circumstances would, therefore, be dismissed." The same point of law has been submitted by the Commissioner of Income‑tax in respect of the other sales tax cases.

4. The question whether evasion of sales tax is covered by Martial Law Regulation 32 issued in 1969 has been considered in (1979) 39 Taxation 56 where after considering the Circular M. L. R. 1 of 1969 and Circular M. L. R. 3 of 1969 issued by the Central Board of Revenue, the Lahore High Court extended the benefit of Martial Law Regulation 32 even in respect of sales tax. In that case the assessee had filed nil sales tax returns for 1964‑65 and 1965‑66, but in 1969 he had declared excess income under M. L. R. 32 and the same had been processed and assessment had been made under Martial Law Regulation 32 of 1969 but the Sales Tax Officer had proceeded to assess him for sales tax and had not extended the benefit of assessment under M. L. R. 32 to the proceedings under the sales tax and proceeded to assess him under the sales tax. But the Tribunal, on appeal reversed the order and extended the benefit of clause (a) of para. 5 of Circular No. 1 as amended by Circular No. 3 issued by the Central Board of Revenue under Martial Law Regulation No.

32. In those circumstances the following question of law was referred under section I7(1) of the Sales Tax Act, 1950 to the Lahore High Court for decision "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's Sales Tax Returns should be accepted in view of the Board's Circular No. M. L. R. 1 of 1969 as amended by Circular No. M. L. R. 3 of 1969."

5. High Court had clearly answered the said question in the affirmative, para. 7 of that judgment is relevant and same is reproduced hereunder :‑ "The basis for extending the benefit of clause (a) of para. 5 is that the income or gains from such suppression or evasion of tax or duties have been accounted for and included in the revised return or the consolidated statement of the tax‑payers and subjected in tax under the exceptional provisions of the Martial Law Regulation. This assumption would arise not only in the case of the first category but also iii the case of the second category though not in the cases of the third category. This requirement of para. 5 (a) of the Circular being fully and completely satisfied in the case of the assessee before us like others governed by clause (b), para. 15, the benefit cannot be withheld or the technical correctness or incorrectness of the consoli dated statement filed by him." Finally the answer of Lahore High Court to the question referred was that the Tribunal was justified in holding that the assessee's Sales Tax Returns should be accepted in view of the Circulars 1 and 3 of the Board of Revenue.

6. The Department had felt dissatisfied with the judgment of the Lahore High Court above‑referred but the Supreme Court confirmed the view of the Lahore High Court in 42 Taxation

45. 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 excess 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 of tax is covered by M. L. R. 32 whether the said evasion be, on account of false returns, made by the assessee or on account of misinterpretation of the provision of law. Consequently, it has to be affirmed that the Income‑tax Tribunal was justified in dismissing the appeal of the Department on the basis that pending the consideration of the departmental appeal, the opponent had filed a declaration under Martial Law Regulation No. 32 and the same had been processed by the Department and, therefore, the appeals of the Department had lost their merits and had to be dismissed.

7. Mr Mansoor Ahmad Khan, learned counsel for the applicant did not question the principles of law established that declaration under Martial Law Regulation 32 covered an evasion of sales tax as well as the same had been finally settled by the Supreme Court in 42 Taxation

45. However, Mr. Mansoor Ahmed Khan tried to argue that no declaration under Martial Law Regulation 32 had been filed by the opponent and that in any case the period of 1‑1‑1961 to 30‑1‑1961 was not covered by the said declaration. He filed an affidavit of Mr. Khawar Khursheed Butt to that effect and filed certain documents in support of the same which showed that the opponent/assessee‑Company had filed nill return under M. L. R. 32 but that its directors nr share‑holders had shown excess income of Rs. 56,00,000 as their excess income from the affairs of the Company. Mr. Mansoor Ahmad Khan stated that the Income‑tax Appellate Tribunal was not justified to dispose of the appeal of the Department merely on the basis of statement made by the counsel of opponent that declaration under M. L. R. 32 had been filed, Mr. Mansoor Ahmed Khan states that the Department was taken by surprise. We are however not impressed by these submissions of Mr. Mansoor Ahmed Khan, as we shall discuss later.

8. Mr. Ali Athar had objected to the filing of any affidavit by the Sales Tax Officer at this stage which challenges the factum of a declaration under M. L. R.

32. Mr. Ali Athar relied upon A I R 1940 P C 158 and fur ther (1974) 29 Taxation 32 where it was held that in deciding a reference under section 66 of the Income‑tax Act, the High Court's jurisdiction is merely advisory and is restricted to answering the only question referred to it. We found that the provisions of section 17 of the Sales Tax Act, 1951 are in pari materia with section 66 of Income‑tax Act in respect of Reference to the High Court and therefore we have no hesitation in following those 2 decisions. It was held in P L D 1959 S C (Pak.) 202 as under : "What is provided in section 66(1) is not a reference of any question arising on the facts of the case but only a reference to a question or questions which arise out of the order of the Appellate Tribunal."

9. We are, therefore, of the view that we are bound to answer only the question which has been referred to us by the Tribunal and which has been raised by the applicant himself and not any other.

10. In this respect, we may also note that the Appellate Tribunal has noted its conclusion that the excess income declaration in this case for that period has been processed and we do not find any protest having been made by the Department's Representative in respect of that assertion. Moreover, even in the application for reference made by the applicant before the Tribunal, there was no grievance made of the fact that either the period of assessment was not covered or that declaration under M. L. R. 32 had not been made by the opponent. And we may note 5`ere that the application of the Department for reference had been made after 3 months of the decision of the Tribunal. The decision of the Tribunal was on 10‑6‑1970 and the application for reference was made on 11‑9‑1970 and yet there was no protest made as indicated above. Even in the application of the Department made .on 23‑7‑1971 before the High Court in S. T. C. 49/71, there is no challenge to the position that there was no declaration under M. L. R. 32 by the opponent. Not only that S. T. C. 49 and S. T. C. 50 applications before the High Court do not contain a challenge to the factum of M. L. R. 32 declaration having been made by the opponent but on the other hand what we find is that the order of the Tribunal dated 24‑3‑1971 out of which S. T. Cs. 49 and 50 of 1971 arise contains the assertion of the Department in respect their appeals which is to the following effect :‑ "that the learned Appellate Assistant Commissioner should not have entertained the appeals for the 2 years as the assessee had made a declaration under hf. L. R. 32 covering the years under consideration in view of pare. 141) on instructions contained in circular No. M. L. R. 1/69 as amended by Circular M. L. R. 3/1969."

11. Thus, it is clear that even the Department itself was treating the declaration of the Opponent under M. L. R. 32 as a bar to the entertainment of their appeals and such bar could not have been pleaded unless and until the declaration made by the Directors and shareholders of the Company were being treated as the declarations made on behalf of the opponent Company. Therefore, it is obvious that the opponent cannot now challenge that there was no declaration made by the opponent under M. L. R.

32. We, therefore, repel the contention of Mr. Mansoor Ahmed Khan in this regard.

12. Mr. Mansoor Ahmed Khan had tried to rely upon an order made by this Court on 13‑3‑1979 in S. T. C. 49/71 to the following effect .‑ "It has been pointed out to Mr. Mansoor Ahmed Khan that some earlier order of the A. A. C. and I.‑T. A. T. on which reliance has been placed in the orders which are the subject‑matter of this case were not on file so that we did not know the process of reasoning adopted. Mr. Mansoor Ahmed Khan requests for time to produce those documents." Mr. Mansoor Ahmed Khan submits that it is under the order of the Court that he is seeking to file these documents which he has filed alongwith affidavit of Mr. Khawar Khursheed Butt today. But we do not find any justification for the same because the order of the Court is very clear. In S. T. Cs. 49 and 50 of 1971, the orders of A. A. C. and I: T. A. T. were passed on the basis of some earlier order passed by them and those orders which were the basis of these orders were in fact a part of Income‑tax Reference 35/71 which was not placed at that time before the High Court as submitted by Mr. Ali Athar and, therefore, that order ‑of 13‑3‑79 was passed in order to ascertain the basis of the orders which were impugned in S. T. Cs. Nos. 49 and 51 of 1971, therefore, Mr. Mansoor Ahmed Khan is not justified in introducing new facts by filing an affidavit today which changes the whole basis.

13. Mr. Mansoor Ahmed Khan had tried to argue that in the context of the words "the facts and circumstances" referred to in the question of law before the High Court he is entitled to raise the question of their being no declaration under M. L. R.

32. We do not find any justification in that submission. In fact the question referred itself stipulates that there was a declaration under M. L: R. 32 and the facts and circumstances which are stated in this reference can be only those circumstances whether the declara tion under M. L. R. 32, which bad been made under the Income‑tax Act, can also cover the evasion in respect of other taxes and duties apart from income‑tax evasions, and also those circumstances which could be relevant to the point of law that an evasion of sales tax on the basis of the inter pretation of the provisions of law in respect of the value of the goods being fixed for the purposes of sales tax on the basis of the declaration of their value by the Excise Department was a misinterpretation of a provision of law or not. No other facts or circumstances were involved in that question and certainly that question did not involve any challenge to the filing of declaration under M. L. R. 32.

14. In view of the above discussion, we have no hesitation in answering in the affirmative the question of law referred to us and the answer is, therefore, the following :-- "On facts and in the circumstances of the case Income‑tax Appellate Tribunal was justified in holding that assessees declarations under M. L. R. 32 covered also such taxes and duties as were evaded on account of interpretation of a provision of law and that the Departmental appeals in such circumstances lost their value." Reference answered in the affirmative.