P L D 1978 Karachi 518 (PLP)

S. A. NUSRAT, J.‑The petitioner is a partnership firm registered under section 26‑A for the purposes of Income‑tax Act. By an amendment made in the Income tax Act in 1976, a new section 3‑C was introduced together with Fifth Schedule (hereinafter referred to as the Schedule) making provision for declaration of undisclosed income by a person in respect of his all income, profits and gains of any previous year or years ending before the 1st day for July, 1975. The undisclosed income was thus to cover the period up to the assessment year 1975‑76, and tax on such declared income was to be paid at 30 %. Rule 3 of the Schedule laid down that save as provided in sub rule (2), which provided for payment of tax in case the undisclosed income was in the form of assets other than cash, the income‑tax of undisclosed income was to be paid before making a declaration, and the declaration was to be accompanied by proof in respect thereof. Rule 7 of the Schedule authorised the Central Board of Revenue to make rules and issue necessary orders and directions for giving effect to the provisions of the Schedule or concerned matters connected therewith for which no provision or no sufficient provision existed in the Schedule. In exercise of powers confer red by rule 7 of the Schedule the Central Board of Revenue framed rules called the Income‑tax (Declaration of Undisclosed Income) Rules, 1976, by a Circular C. No. 63(211)‑II‑IV/76 dated 14th July, 1976 for the imple mentation of the provisions of section 3‑C of the Schedule. In order to avail the benefit of section 3‑C of the Income‑tax Act the petitioners filed a declaration of their undisclosed income on 31‑8‑1976 for the assessment years 1973‑74 to 1975‑76, showing undisclosed income of Rs. 9,03,333, Rs. 9,33,333 and Rs. 90,30,334 for each of the said three assessment years, respectively, making a total of Rs. 27,10,000. A cheque for Rs. 2,53,000 was enclosed with the declaration with a request that the petitioners may be allowed time for payment of the balance amount of tax until the question of payment of compensation in respect of their taken over industry; namely, Indus Roller and Flour Mills Ltd., Karachi, was decided by the Government. However, the Income‑tax Department demanded payment of balance amount of tax with a threat to charge 2 % interest thereon in case of non‑payment. The petitioners made representations to the Minister of Finance, Central Board of Revenue and the Commissioner of Income‑tax requesting for withholding the demand and allowing adjustment as prayed for, which was of no avail. The Commissioner of Income‑tax, however, permitted the petitioners to pay the outstanding amount of tax in instalments clearing the liability by 31‑12‑1977. As the fact stands the Assistant Income‑tax Officer, Mirpur Khas. had already processed petitioner's Return of Income for the year 1975‑76 and passed an order of assessment on 26‑8‑1976. However, the petitioners have alleged that the fact regarding passing of the said order of assessment was brought to the notice of the petitioners by their Tax Adviser in the first week of September, 1977, after they already filed declaration of their undisclosed income. The petitioners filed an appeal against the order of assessment which was withdrawn in terms of the circular of the Board. In processing petitioners' Return of income for the year 1975‑76, the Income tax Officer made an addition in their trading account to the tune of Rs. 1,29,194. The petitioners made a representation to the Finance Minister on 6‑9‑1976, contending that the sum of Rs. 1,29,194 was doubly taxed in their hands, as the same was covered by the declaration of undisclosed income and permission was sought to revise the declaration in respect of the year 1975‑76 to the said extent. The said representation was, however, rejected by the Central Board of Revenue on 10‑7‑.1977, and it is the said decision which has now been challenged in this petition. It is contended that the petitioners were legally entitled to revise their declaration reducing their liability and they have been doubly taxed to the extent of the amount mentioned above in respect of assessment year 1975‑76. The second conten tion raised in the petition is that the recovery of balance demand of Rs. 5,60,000 was liable to be adjusted against the amount of compensation payable to them in respect of their taken‑over Flour Mill by the Government, and this concession was withheld unlawfully by the respondents. In so far as the second contention raised in the petition is concerned, the same can be disposed of on the short ground that the petitioners' Indus. Roller and Flour Mill, which was taken over by the Government, has since been restored to them, and as such compensation as envisaged earlier is no more to be paid to them. Even otherwise, the learned counsel for the petitioners was unable to refer to any provision contained in the Schedule or the Circular of the Board dated 14th July,. 1977, entitling the petitioners to claim adjustment. On the contrary the pettioners were to pay tax on their undisclosed income simultaneously with the filing of the declaration as per rule 3 of the Schedule and rule 11 of the Circular which laid down that dec larations were to be accompanied by a .copy of the Treasury Challan showing payment of tax at 30 %. This contention, therefore, is liable to outright rejection. In order to appreciate the first and main contention raised by the petitioners, that is, alleged double taxation of the amount of Rs. 1,29,194 in respect of assessment year 1975‑76, it is necessary to refer to the definition of 'undisclosed income', which is contained in rule 1 of the Schedule and is as under :‑ "Definition.‑ For the purposes of this. Schedule and section 3‑C, undisclosed income of a person means all income, profits and gains of any previous year or years ending before the first day of July, 1975, which were chargeable to but were not , o charged." Rule 3 of the Income‑tax (Declaration of Undisclosed Income) Rules, 1976 defines that "income charged to tax" should be the income‑ (a) declared in any return of income furnished under section 22 or section 34 of the Act, where such income has not been assessed to tax under section 23 or section 23‑B of the Act ; or (b) assessed to tax under section 23 or section 23‑B of the Act and, where such assessment has been made subject of appeal or revision, as enhanced or reduced, as the case may be, by the Appellate Assistant Commissioner, the Appellate Tribunal, or the Commissioner." The meaning of the words 'income charged' and 'income chargeable' were further explained by the Board of Revenue in paras. 2 and 3 of the Circular as under :‑ "2. According to 'the definition given in rule 1 of the Fifth Schedule undisclosed income of a person means income, profits and gains of any previous year or years ending before the 1st day of July, 1975, which were chargeable to tax but were not so charged. In plain language undisclosed income constitutes such income as was liable to income‑tax in any year up to assessment year 1975‑76 which was not assessed to tax for that year. 3. Where a person has been assessed to incomes‑tax in respect of the year.for which he makes declaration of undisclosed income the income chargeable for that year would be the 'income' assessed plus an undisclosed income and the income charged would be the income assessed." A plain reading of rule 3 of the Circular reproduced hereinabove makes it abundantly clear that after an assessment was finalised the income of that year plus the undisclosed income was to constitute the income chargeable for that year. The very scheme of calling for declaration of undisclosed income in respect of any previous year or years ending before the 1st day of July, 1975, makes it plain that income‑tax assessments of all the previous years were not to be reopened for the purpose of declarations and income declared was t be in addition to the income already assessed. It is part of the same logic that all pending appeals against orders of assessment which were filed by the assessees or by the Department, except on points of law, were to be withdrawn with a view to give finality to the assessments which stood finalised before the filing of declarations. For the reasons mentioned hereinabove we find no substance in this petition which is dismissed in limine. s. A. H. Petition dismissed.