2003 PLP (Trib (PTD)

Machinery provision

Machinery provision could not be used as substitute of charging provisions of tax law. Muhammad Asif, D.R. for Appellant. Kh. Muhammad Iqbal Advocate and M. Faisal Iqbal Khawaja, A.C.A. for Respondent. Date of hearing: 27th March, 2003. KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).

The petitioner in this case is the department. Questions for the consideration of the Honourable High Court which are common for all the five years are as follows:-- (1) "Whether on the facts and circumstances of the case the ITAT was justified to impose time limit on section 52 whereas law does not provide any limitation on such action as it is more akin to recovery outstanding taxes (where no limitation. is imposed) rather than assessment of taxes?" (2) "Whether on the facts and circumstances of the case rational adopted by the learned ITAT was self-contradictory insomuch as, at one place it is observed that proceeding under section 52 has no relation/nexus with assessment, proceeding and .on the other hand limitation is imposed-on the basis of provision relating to assessment proceedings?" (3) "Whether on the facts and circumstances of the case, the imposition of limitation by ITAT amounts to legislation which is beyond the jurisdiction and power of ITAT?" (4) "Whether on the facts and circumstances of the case the learned ITAT was justified to hold that on 29-5-1991 the Assessing Officer had no power to call the books of accounts for these years. Even if the limitation imposed is accepted (not conceded), the same was to be reckoned from the date when first notice under section 52 was issued?" (5) "Whether on the facts and circumstances of the case the learned I.T.A.T. was justified to hold that the information for holding an assessee in default requires even stronger evidence than for re-opening of the case under section 65 of the Income Tax Ordinance, 1979 in terms of definite information?"

2. The learned DR while supporting question said that taw does not provide for any limitation for making assessment under, section 52 while the learned Tribunal has prescribed the same which is against the very spirit. It is an independent provision not only that it can be applied at any time but also can create a charge within its own sphere. It is not an assessment either under section 62 or 63 but an independent provision which is very rich and contains all the requirements and procedure within itself. It can be applied before the assessment and even after the assessment at any time if the circumstances and facts of the case so permit. He said that Question No.1 therefore, requires support of the Tribunal and should be referred to the Honourable High Court.

3. Learned DR while supporting the other questions said that the finding of the Tribunal is not in harmony with the other parts of the order. In fact it is self-contradictory in the manner that the learned Tribunal says that the proceedings under section 52 are independent and have no nexus with assessment proceedings while it has prescribed limitation keeping in view the assessment proceedings. In his opinion the learned Tribunal has gone beyond its jurisdiction and has entered into the sphere of legislation by impositing limitation for an assessment under section

52. Regarding ether two questions he said that the calling of record on the basis of an earlier notice, should have been reckoned and not from the subsequent notice. Similarly, since there is no such connotation in section 52 as is obtaining in section 65 i.e. "definite information" the learned Tribunal was not justified in holding that stronger evidence was required to hold the assessee in default.

4. The learned AR on his turn said that it is not proper r6 say that the Honourable ITAT has prescribed some limitation in this case. The learned Tribunal has rightly held that the assessment proceedings are independent and are related to determination of the income of the assessee from his business, trade or profession. He, however, said that if at all any, question arises out of the order of the Tribunal he does not have any objection on obtaining a superior view from the High Court. In any case he remarked that the learned Tribunal has not given any contradictory finding and that it has an open view on basis of, the provisions of the Income Tax Ordinance available on record. The questions, therefore, do not arise out of the order of the ITAT.

5. We have heard both and have perused the order of the ITAT We feel. ourselves not in agreement with the Department that we have prescribed any limitation for finalisation of an order under section

52. This Tribunal has only brought to the attention of all concerned the provision of section 61 under which books of accounts can be inspected within a period of three year: prior to the income year and this is only 'If' interpretation of the statutory provision obtaining in the book. If tomorrow the legislator in its wisdom makes an extension in same. Obviously the Department will have the liberty to take the advantage of the same accordingly. The learned Tribunal has only held that the Assessing Officer cannot ask for the books of accounts relating to a period more than three, years prior to the income year. The fact that he had made purchases liable to deduction can only be determined from books. There is, therefore, no chance for going beyond the same period. It should go without saying that the Assessing Officer cannot determine the extent of supplies received by the assessee liable to withholding tax if he cannot lay , hands to the books of accounts for said prescribed period. These are the circumstances which have forced the learned Tribunal to hold that provisions of section 52 are restricted to that extent. In this regard the learned Tribunal has further taken strength from the judgment of the Honourable High Court reported as 2002 PTD 14 wherein the Honourable High Court while defining the words "as soon as thereafter" has prescribed 30 days for application of the provisions of WWF. For this purpose the Honourable High Court has taken support from the Civil Procedure Code. This, therefore, is evident that notwithstanding the fact that the Courts are not legislators, however while interpreting provisions of law a reasonable limitation on the basis of supporting'' legal provisions can always be highlighted. Needless to mention that the Tribunal while giving an ultimate finding has already discussed the scope of the interpretation and have also followed the principle that the Courts cannot go beyond intendments and that legislation is not the job of the Courts. The result of above discussion, therefore, is obvious. Questions Nos.1, 2 and 3, therefore, are covered within the discussion. We, therefore, do not consider any merit therein.

6. So far as Question No.4 is concerned it may, be a matter of record that a notice was issued on 29-5-1991 but proceedings were not continued on the basis of the same. Record does not disclose as to whether the same was withdrawn or not. However, the order of holding assessee in default, dated 8-2-1999 was for the assessment year 1995-96 only. Subsequent proceedings for the assessment years 1991-92 to 1994-95 cannot be considered as continuation of the said order. The above notice, therefore, by fro means was in field for the purpose of these four assessments. The Question No.4, therefore, again is without any substance and that the same does not arise from the order of the ITAT.

7. Coming to the Question No.5 we would like to bring on record once again the two provisions before its. Firstly section 65 which is meant for re-opening of an earlier assessment. This section applies on availability of "definite information". There is no doubt about the words as Honourable Supreme Court has explained the same in a number of judgments Wherein meanings of these words have been thrashed out in detail. In this regard the famous judgments titled as Messrs Edulgi Dinshaw, Messrs Chapal Builders, Messrs Genning Schools and Central Insurance Company can be referred. The Honourable Supreme Court has held that the word "definite information" has only covered something definite which creates a reason to believe that the income has been under-assessed. Any estimate gossip, surmise or reason to suspect has been excluded from the said definition. We have in the judgment under discussion held that stronger proof is required for application of the provisions of section

52. The Department objects to this observation. Not much arguments have been advanced in support of Department's contention, however, since we are firm in our view we would like to add certain more reasons to our observation. Section 52 has already been detailed in our order. For brevity we will mention again the relevant extracts of the said section. "Where any person falls to deduct or collect, he shall, be deemed to be an assessee in default in respect of such tax". The catch words in these sentences are "falls to deduct". The connotation is clear and it calls for strict determination that a person has failed to deduct tax wh.ch he was legally bound under the provisions to section 50(4)(a). This. is determination of a fact. This connotation can be equated with use of word "found" in section 13(i)(a), (aa), (b), (c) and (d). Word definite information in any case speaks of an information which should he definite and the words "fails ,to deduct" or "found" obviously stronger than the same. Even if, for the discussion sake, we agree with the Department that these words are equal in its strength still it would not be of airy help to them. Section 52 even if we say should be invoked on the basis of definite information the result will be the same as has been held in our judgment under discussion. In our humble opinion such provisions which are called as deemed provisions of Income Tax and those which has come as a penalty are not meant to strengthen the muscles of the Revenue Department. Particularly the provision under discussion is a machinery provision, which cannot be used as substitute of charging provisions of Income Tax Ordinance. Keeping this basic philosophy of the Income Tax law and also keeping in view the historical background we have given our finding. To us there is no merit in any of the questions mentioned above. The reference of the Department for all the years is without any substance and, therefore, dismissed. C.M.A./821/Tax (Trib.) Reference dismissed.