CBR's Circular

Selection of cases for total audit under para. 9(2) of the Self-Assessment Scheme 2002-2003, allegedly without adverting to the facts and circumstances of the case and'on the basis of whims and history of the cases while acting subjectively and mechanically by the Department

Procedure to be adopted

Notices were issued by the Regional Commissioner to the assessees mentioning the grounds for directing the cases to be put through audit test

­Assessees made replies explaining the queries raised in the notices

­Contentions of, the assessees were that their pleas were dropped perfunctorily without hearing the assessees and the cases were fixed for total'audit; that method adopted for purposes of selection of cases had to be transparent, objective, sensitible in terms of the dynamics of business rather than based on anarchistic theory of income and expenditure; that after fixing the date of 10th January, 2003, the date was arbitrarily and quietly rather surreptitiously extended in order to trap more people who had submitted their returns under the scheme; that if rthe documents submitted . had been properly examined, the result would have been different which meant that after the submission of the reply to the notice given by the Regional Commissioner to the assessees if hearing too was afforded and a speaking order written in their presence and the presence of Department's representative and record seen in the sitting, it would have met the ends of justice, the exercise of hearing had been in harmony with the instructions of the Board of Revenue, which would have helped the Department in picking up only the befitting cases for total audit and that Central Board of Revenue being a delegate of the Legislature had to act itself under S.59, Income Tax Ordinance, 1979 and could not delegate powers, for selection of cases for, setting apart under the Self-Assessment -Scheme

Validity

Central Board of Revenue was authorised to frame Self-Assessment Scheme and any instruction issued by the Board in furtherance of Self-Assessment Scheme ought to be read as a part of the Scheme

All the civilized Governments keep narrow their credibility gap vis-a-vis their citizens, otherwise all policies of the Government were -bound to be taken skeptically and the failures were inevitable

By throwing open a promise that the cases filed under'Self-Assessment Scheme would be acceptable without the smell of embellishments/suppression of income/its concealment, it assured a taxpayer that he will be trusted as far as possible until there were real and floating circumstances appearing from the record reflecting cheating on his part

Such promise gave the taxpayer an understanding that only in such a case he would be denied availing the benefit of Self-Assessment Scheme and not otherwise

­Persuasive epigrams could be written to show proper serutiny of record without the exact exercise having taken pike-as a prelude for setting apart of a case for total audit

Scrutiny was not possible without hearing the person who replied to a show-cause notice and appended documents showing the source of his income, the actual income, his expenditures and savings with any admissible benefits

Government policies framed with noble intentions get bruised and defeated often fractured in the arena of the subordinate echelons where invariably the spirit and purpose of the policies framed by the Board of Revenue hardly permeate

­Central Board of Revenue as the apex body in matters of revenue ought to have a forum for checking whether an assessee whose return under Self-Assessment Scheme was being set apart for complete audit had a genuine grouse and, if so, what was the cure

Maxim: "Ubi jus ibi remedium" was an elementary principle, which meant that if a person had a right, he should also have a means to vindicate and maintain it, and a remedy if he was injured in the exercise and enjoyment of it, and, indeed it was a vain thing to imagine a right without a remedy, for want of right and want of remedy are reciprocal

Entitling every assessee to submit his assessment of income under the Self-Assessment Scheme, was bestowing a right on him which was of course subject to the condition that if there was any skepticism about it, it might fail on ground of eligibility

Such skepticism had to be well based calling for scrutiny and check otherwise the rights bestowed would be nullified on basis of guess, whims and bias, and this way the progressive ideas needing care and protection would get destroyed

High Court observed that such duty could be performed by a committee comprising of the Local Regional Commissioner of Income-tax joined by the Commissioner of Income-tax and any other inductee conversant with the law, who may hear the parties and then adjudge

Such would then be a domestic forum for resolving the dispute without delay and would provide an in home care and would surely be helpful in reducing litigation, safeguarding Government policies while keeping a check on arbitrariness so rampant in the system

High Court having not been informed whether such a body existed, it remitted all the cases to a body of three persons to be constituted by the Central Board of Revenue for each Zone headed by a Regional Commissioner and membered by the Commissioners for taking majority decisions through speaking orders on the question of validity of the objections raised by an assessee before his case was put to total audit

Such could be the minimum safeguard to be provided to a citizen in the difficult system

Department, in the present cases, before embarking upon setting aside the returns under Self-Assessment Scheme having not afforded the hearing to the assessee for personal explanatipn, the Committee to be formed in the next fourteen days shall study each of the cases and would then determine in the light of the observations of the High Court the guidelines, the rationale of Self-Assessment Scheme and the instructions issued froth time to time by the Central Board of Revenue, the merits of each case

C6mmittee shall finalize all such cases after passing speaking and objective orders to be signed by all the members within a period of ten weeks from the date of the High Court judgment and during which, time the orders impugned through the present Constitutional petitions shall be kept in abeyance. Income-tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108; Messrs Ikhlaq Cloth House, Faisalabad v. Assistant Commissioner of Income-tax, Faisalabad and others 2001 PTD 3121; Mrs. Yasmeen Lari v. Registrar, Income-tax Appellate Tribunal 1990 PTD 967; Muhammad Asghar and others v. Income-tax Officer and others 1986 PTD 357; Mian Kamal Anwar, Sargodha Road, Faisalabad v. Income Tax Appellate Tribunal, Lahore and others 2002 PTD 1895; Messrs Muhammadi Oil Trading Co. Karachi v. Regional Commissioner of Income-tax, Southern Region, Karachi and another 1994 PTD 494; Messrs Pakistan Educational Society .v. The Government of Pakistan through Chairman and Secretary, Revenue Division, Islamabad and 2 others 1993 PTD 804; Ashby .v. White, 2 Raym. Ld. 938 at p.953; Dixon V. Harrison, Vough, 37, at p.47; North v. Coe, Vaugh, 251 at p.253 and Winsmore v. Greenbank, Will 577 at p.581 ref.

First Appellate Authority deleted such tax on the ground that provisions of S-80-D of the Income Tax Ordinance, 1979 were not applicable on income from investment in Government securities, interest on late payment of contributions and profit and loss sharing account because gross receipts from these sources were not received under the head "business" and profession

Department pleaded that Investment rules of the trust showed that the business of the trust was to make investment in Government : approved interest bearing securities and shares of listed companies and such earnings of the trust from investments were business income chargeable to tax under the provision of S.80-D of the Income Tax Ordinance, 1979

Validity

Pakistan Telecommunication Employees Trust was managed by a Board of .Trustees

Purpose of the establishment of the trust was the maintenance of pension fund

Pension fund consists of amounts received from the employee's pension fund contribution, donations and investments and profits, gains and other returns accrued on such investments

Legal status and scheme given in accounts showed that trust was established to provide gratuity, superannuation, retirement, family and invalid pension. and commutation to the employees

Department failed to show that assessee was engaged in any business or industrial undertaking

Provisions of S.80-D of the Income Tax Ordinance, 1979 were applicable on "gross receipts" from "business or profession" profits and gains which were ordinarily chargeable under S.22 of the Income Tax Ordinance, 1979

Since income of the assessee fell under the head of "income from other sources" the provisions of S.80-D of the Income Tax Ordinance, 1979 were not attracted

Order of the First Appellate Authority was maintained by the Appellate Tribunal and appeal of the Department was rejected.

Department was found to have had valid reason for its prima facie view that the complainant/ assessee's income had been suppressed

While making the assessment of the Assessing Officer would consider the facts in the complainant/ assessee's case and would allow the complainant/assessee adequate opportunity of showing why in its case there could be a deviation from the formula agreed to by other flour mills

Complaint was rejected by the Federal Tax Ombudsman.

federal Tax Ombudsman recommended that the complainant/assessee's return be excluded from the cases selected for total audit under para. 9(a)(ii) of the Self-Assessment Scheme, 2002-2003 and the declared income be accepted.

Assessee paid tax more than 30% as compared to tax payable on last assessed income and the requirement of the Universal Self-Assessment Scheme 1999-2000 was thus fulfilled

Copy of the return filed in duplicate was received back by the Assessee from the department which constituted the assessment order under S.59(1) as provided in para. 12(b) of the Universal Self-Assessment Scheme of the assessment year 1999-2000

Assessing Officer issued notice under S.61 of the Income Tax Ordinance, 1979 by excluding the return of the assessee from Universal Self-Assessment Scheme on the ground that return did not qualify for acceptance under the Universal Self-Assessment Scheme in the light of the clarification made by the Central Board of Revenue under Letter C. No.7(55) S.Asstt/29 dated 27-9-1999 although the assessment already stood completed

Validity

Said letter of Central Board of Revenue was addressed to the President, Income Tax Bar Association. Karachi and the clarification quoted by the Assessing Officer did not appear anywhere in the said letter and during the hearing the representative of the department was unable to show as to where the clarification had been taken from

Furthermore, even if it was assumed that the said clarification was contained in some other Circular and was valid in the context of the Universal Self-Assessment Scheme for the assessment year 1999-2000 it was evident that according to said clarification turn over tax (i.e. tax under S.80(D) of the Income tax Ordinance, 1979) could be made the basis for comparison "where tax was payable or paid on income last declared or assessed due to loss"

Factual position, was that in the complainant's case, although loss had been declared for the assessment year 1998-99 but the income was assessed at Rs.98,012 and the tax payable by the complainant consisted of tax on Rs.98,012 plus tax under S.80-D of the Income Tax Ordinance, 1979 consisting of tax @ of 0.5 % of the complainant's total turnover minus tax on the assessed income thus it could not be said that for the year 1998-99 turnover tax (viz. tax under S.80-D of the Income Tax Ordinance, 1979) was payable on account of loss and that such tax under S.80-D of the Income Tax Ordinance, 1979 formed the basis for comparison with the tax for the assessment year 1999-2000

Even the alleged disqualification contained in the Central Board of Revenue clarification did not apply in the complainant's case

No valid basis existed for any attempt to exclude the Complainant/assessee's return for the assessment year 1999-2000 from the purview of the Universal Self-Assessment Scheme

Since such an attempt amounted to maladministration, there was no merit in the preliminary objections of the department

Federal Tax Ombudsman recommended that the proceedings relating to normal assessment for the year 1999-2000 be dropped and the complainant's return be accepted under the Universal Self-Assessment Scheme.

Subsection (8A) of S.7 of the Finance Act, 1989 empowered Commissioner of Wealth Tax to revise any order made under S.7 of the Finance Act, 1989

No clause existed in S.7 of the Finance Act, 1989 or the Capital Value Tax Rules, 1990 for payment of revision fee amounting to Rs.1,000

Even in C.B.R. Circular No.9 of 1997 dated 24-7-1997, it had not been clarified that revision fee under S.25 of the Wealth Tax Act was payable

Only Ss.30, 31 & 32 of the Wealth Tax Act have been referred in S.7 of the Finance Act, 1989 and the Capital Value Tax Rules, 1990

Said section deals only with recovery proceedings

Section..25 of the Wealth Tax Act, 1963 was not applicable in the matter relating to Capital Value Tax

Act of the Commissioner of Wealth Tax was contrary to law and rules, hence fell within the definition of maladministration

Federal Tax Ombudsman recommended that the Commissioner of Wealth Tax should decide the revision application of the complainant dated 1-11-2001 on merits without asking for revision fee.

Tax deducted on import from assessee of Azad Jammu and Kashmir had not been transferred to the Government of Azad Jammu and Kashmir

Tax authorities of Azad Jammu and Kashmir refused to give credit of such tax deducted being not credited in the Treasury of Government of Azad Jammu and Kashmir

Complaint for either to refund the same or to transfer the said amount to Government of Azad Jammu and Kashmir

Validity

As far as quantum of tax collected under S.50(5) of the Income Tax Ordinance, 1979 was concerned, there was no dispute and the only problem was with, regard to the obtaining of credit for this amount in Azad Jammu and Kashmir which according to the authorities there was only possible when the amount was remitted by the Government of Pakistan to Azad Jammu and Kashmir

Such was a matter between the two Governments who had to take steps to resolve the problem relating to tax collection made under S.50(5) of the Income Tax Ordinance, 1979 from assessees from Azad Jammu and Kashmir'prior to the Central Board of Revenue Circular No. 13 of 1998, dated 2-10-1998-Tax had been collected from assessees of Azad Kashmir under S.50(5) of the Income Tax Ordinance, 1979 and they were entitled to the credit in one way or the other

Federal Tax Ombudsman recommended that Revenue Division may take up the matter with the concerned Ministry so that the problem of Azad Jammu and Kashmir importers relating to collection under S.50(5) of the Income Tax Ordinance, 1979 prior to Central Board of Revenue Circular No.13 of 1998, dated 2-10-1998, is solved satisfactorily.

Show-cause notice issued was barred by time as the same was issued after a period of six months as prescribed under S.32(3) of the Customs Act, 1969

Order was not sustainable alone on this ground

Appeal was accepted and order was set aside by the Appellate Tribunal.

Reasons.

Selection of case after 5-4-1991, the target date fixed by Central Board of Revenue in Circular No. 1(3)DT-14/91, dated 1-4-1991

Legality

Central Board of Revenue had directed the authorities to finalize the selection of cases by 5-4-1991 but the case of the assessee was selected for total audit-on 10-4-1991

Validity

Such selection of case was in clear violation of the direction issued by the Central Board of Revenue which was the apex body in revenue collecting hierarchy

Central Board of Revenue was Authorised under Income Tax Ordinance, 1979 to frame Self-Assessment Scheme for every assessment year

Every instruction issued by the Board in furtherance of Self-Assessment Scheme was to be read as a part of the Scheme

Any deviation on the part of Revenue Authorities could not be seen with favour

Assessment made under the audit was set aside in circumstances.

Assessee may find it very difficult to be an appellant before the higher forums in the case of an agreed assessment.

Exemption from payment of sales tax on tyres and tubes was refused ..by the Department on account of those being not components and parts of the vehicles

Validity

Tyres and tubes do form part of the motor vehicles for the simple reason that the entire mechanism of the vehicles meant ultimately to activate the wheels and would not make the vehicles move without the wheels being equipped with tyres and tubes

C. B. R. Circular No. 16(19)STT/89, dated 3-10-1995 was declared to be without lawful authority by the High Court.

Notice of assessee demanding challan of payment under S.50 of the Income Tax Ordinance, 1979 by the Assessing Officer having the jurisdiction over the place of business of the assessee

Assessee challenged such notices by a Constitutional petition on the ground that Assessing Officer had no jurisdiction to issue such notice as its registered office was located out of his jurisdiction where the assessee was being assessed

Validity

Assessing Officer merely issued notices to the assessee for monitoring the collection of tax under S. 50 of the Income Tax Ordinance, 1979 which jurisdiction was conferred upon him under the law

Jurisdiction vested with the Assessing Officer was of a limited nature only to the extent of monitoring collection/deduction at source

Officer never acted as an Assessing Officer in respect of the assessee nor he had issued any notice as such

Constitutional petition was dismissed by the High Court.

No assessment was made for the assessment year 1989-90 as the proceedings were filed and the income last assessed was only in respect of assessment year 1988-89 in which year income assessed was Rs. 79,000 while the assessee declared its income Rs. 48,000 for the assessment year 1990-91 which was less than the income assessed for the assessment year 1988-89, as such the case of the assessee did not qualify for acceptance under Self-Assessment Scheme

Order passed by the Assessing Officer was declared to be in accordance with the Self-Assessment Scheme by the High Court.

Department required the petitioners to offer further explanations, whereupon they again submitted explanations, which were rejected vide order, dated 20-12-2000, which was received by them on 25-1-2001

Contention of the petitioners was that up to 31-12-2000, they did not receive any order of, rejection or acceptance of their declarations, which according to para. 2(c) of C.B.R. Circular No.9 of 2000 would be deemed to have been accepted

Validity

Letter of rejection was sent for the first time by post on 6-1-2001, but due to non-service, the letter was sent to them through process-server

Rejection letter had not been issued by 31-12-2000, thus, declarations filed by petitioners ,would be deemed to be accepted and Department had no jurisdiction to cancel the deemed accepted declarations

High Court accepted Constitutional petition and declared order of cancellation issued by the Department after 31-12-2000 as nullity in law and restrained it from carrying on any assessment or penal proceedings in respect of income/assets declared in amnesty declaration-High Court further clarified that income/value of assets not declared by petitioners would not enjoy immunity under para. 8 of the Amnesty Scheme, and in respect of which on having definite information, the Department would be at liberty to initiate proceedings against petitioners under Income Tax Ordinance, 1979 and Wealth Tax Act, 1963.

Assessee's contention was that appointment of Chartered Accountant for the year 1997-98 had been made under S.4(2) of the Income Tax Ordinance, 1979 for which there was no provision in law; appointment of Chartered Accountant could only be made under the provisions of S.4A of the Income Tax Ordinance, 1979 [as substituted by Finance Act, 1998] -and that appointment having been made without any sanction of law, assessment based on the report of an illegally appointed person was not maintainable

Validity

Appointment had been made on the basis of directions issued by the Central Board of Revenue, no illegality, therefore, was committed by the Commissioner of Income-tax as there was no other way in which the appointment could be made in view of directions of the Central Board of Revenue

Other notification issued on the same date assigning jurisdiction to the special officer under S.5(1)(c) of the Income Tax Ordinance, 1979 enabled the said special officer to exercise his functions and jurisdiction in accordance with provisions of Income Tax Ordinance, 1979

While the said notification mentioned the appointment of Chartered Accountant as a special officer, the other notification issued under S.5(1)(c) of the Income Tax Ordinance, 1979 specified his jurisdiction without which the said officer could not proceed to conduct the specific investigative audit for which purpose he was appointed

Series of events leading to the selection of Chartered Accountant as a special officer by the Central Board of Revenue and communication made in this regard to .Regional Commissioner of Income-tax and subsequent directions issued by the Regional Commissioner of Income-tax for issuing the order under S.4(2) duly authorized the Commissioner of Income-tax to issue the notification appointing the Chartered Accountant as special officer

Other notification on the same date under S.5(1)(c) of the Income Tax Ordinance, 1979 specified the jurisdiction of the special officer-

Person of special officer having been included in the definition of Deputy Commissioner of Income-tax and Deputy Commissioner of Income-tax being subordinate to the Commissioner of Income-tax invoking of provision of S.4(2) of the Income Tax Ordinance, 1979 by the Commissioner of Income-tax for the appointment of the special officer was not invalid

Appointment of Chartered Accountant was, therefore, not in contravention of any law

Appointment of the Chartered Accountant being not illegal, order of the First Appellate Authority was not interfered by the Tribunal.

Persons whose income from salary was at least 5096 of their total income were not required to pay tax for the year 1998-99 equal to or more than tax payable for the assessment year 1997-98

However, no concession or exemption or immunity had been given to such persons for selection of cases of such persons-for special audit in individual capacity or as a class.

Order passed under S.66-A of the Income Tax Ordinance, 1979 was without any legal basis since there was no formal order holding the- field

Invocation of S.66-A of the Income Tax Ordinance, 1979 was without jurisdiction and nullity in the eye of law and void( ab initio

Order was annulled by the Tribunal.

Assessee, a private limited company, purchased a plot for the purpose of construction thereon for sale or letting out but the purpose was not carried "out due to change of circumstances after lapse of 25 years

Taxability of plot being held for the purpose of construction and sale and for letting out the property

Validity

Plot in question was purchased on 14-5-1976, and since the incorporation of the Company even after lapse of almost 25 years no other transaction except purchase of the said plot had been conducted by the assessee

No further steps had been taken for its construction or its use in such a manner which could be treated as business activity

Main object of the Company as per Memorandum of the Association was to acquire, purchase or take on lease pieces of land any where in Pakistan and to construct building and structure thereon for any purpose, and generally to deal in or carry on business related to main object but the fact that nothing was done ever since the company was formed went a long way to prove that merely mentioning of business of the nature could not be made basis to attract wealth tax proceedings

Appellate Tribunal found that plot under construction was not being held by the assessee Company for the purposes of construction or letting out during the years under consideration and was not a taxable asset as defined in S.2(5)(ii) of the Wealth Tax Act, 1963.

Inspecting Additional Commissioner cancelled the assessment order passed under S.59(1) of the Income Tax Ordinance, 1979 on the ground that tax paid under S.54 of the Income Tax Ordinance, 1979 was short as compared to the total tax payable on declared income and directed the Assessing Officer to proceed the case under normal law

Validity

Admittedly tax due was not paid alongwith the return and a part thereof was paid even after the order passed under S.66A of the Income Tax Ordinance, 1979

Since tax paid was short and the Assessing Officer did not take cognizance of the matter, his order under S.59(1) of the Income Tax Ordinance, 1979 was prejudicial to the interest of Revenue

Appellate Tribunal upheld the order of the Inspecting Additional Commissioner passed under S.66A of the Income Tax Ordinance, 1979 in circumstances.

Compensation on advance tax under S.53(4) of the Income. Tax Ordinance, 1979 paid during the financial year 1994-95 was not allowed

Validity

Any circular or amendment in law, if provided withdrawal of the facility from a particular date or time, the. Revenue Officers on their own accord could not draw any analogy to give same a retrospective or prospective effect

Order introducing retrospective effect contrary to essence and purpose of circular amounted to frustrate the relief made available to assessee and law also did not permit such practice, same being illegal, unlawful and without any justification

Order of the two Authorities below was annulled and compensation on advance tax under S.53(4) of the Income Tax Ordinance, 1979 was allowed by the Tribunal.

Assessee/company declared dividends on the profit calculated after creating a provision of diminution in value of investment in shares which was accepted by the Assessing Officer

Inspecting Additional Commissioner modified the assessment by adding such provision in the profit and taxed the excess of reserves over 50% of the paid-up capital under S.12(9A) of the Income Tax Ordinance, 1979

Assessee contended that IAC was not justified to add the provisions for the diminution in the value of investment as the same had been made in accordance with the international accounting standards

Validity

Decline in the value of shares was not drastic which only appeared for the year 1999

Loss for which provision had been made was not actual but a notional loss

Provision was created only to reduce the profits in order to avoid proper taxation under S.12(9A) of the Income Tax Ordinance, 1979

Order of Inspecting Additional Commissioner was upheld by the Tribunal being in accordance with law.

Assessment was re-opened on the ground that "net assets" of assessee were in excess of ratio prescribed in para. 7 of Circular No.9 which prescribed that in case of a new taxpayer it shall be presumed that his "business capital" at the end of the year shall be taken as three times of the business income declared by the assessee

Validity

If the Assessing Officer was of the opinion that capital "employed in business" was more than the required ratio, the Assessing Officer should have called for explanation of the assessee regarding excess capital

If the explanation filed was found to be unsatisfactory, the return could have been excluded out of the purview of the Self-Assessment Scheme

Such an exercise having not been done by the Assessing. Officer despite the fact that prior to finalization of assessment under S.59A of the Income Tax Ordinance, 1979, a notice was issued to him calling for explanation for declaring net assets and no adverse inference was drawn in this regard

Blame thus could not be fastened at the assessee's door that the "business capital" of the assessee was in excess of the prescribed ratio of I to 3 between income declared and the capital as on the prescribed date i.e. 30-6-1993

Re-assessment order made under Ss.62/65 of the Income Tax Ordinance, 1979 was cancelled by the Tribunal and return under Self Assessment Scheme was accepted.

Words "subject to such conditions as may be specified therein" and "where it is so specified" in cl. (129), Second Sched. of Income Tax Ordinance, 1979, and C.B.R. Circular No.20 of 1985

Effect

Words "subject to such conditions as -may be specified therein" 'and "where it is so specified" in the Second Sched. and the Circular makes it clear that the exemption available in the Sched. is subject to the condition specified therein and if there is no-condition specified obviously the exemption allowed is without any strings.

Application for rectification was maintainable and-should have been accepted.

Return filed by the assessee within date extended by the Assessing Officer did not make an 'assessee eligible to avail the benefit of Self-Assessment Scheme

Such return could not be deemed or considered to have been filed within `due date' because the expression "due date" means the date specified under S.55(2) and not the date extended by the Assessing Officer under S.55(3) of the Income Tax Ordinance, 1979.

Assessing Officer refused to accept the assessee's return under Self-Assessment Scheme for the reason that comparison of income and tax paid thereon was not possible owing to change in status of the firm

Validity

While setting apart the assessee's return out of the parameters laid down for special audit, the Assessing Officer had mistakenly involved himself in making comparison of the income-returned as well as the status claimed by the assessee with those of the immediately preceding assessment year

Making comparison on such basis amounted to denial of benefits of Self-Assessment Scheme to the assessee

Case of. the Department was not that the assessee had paid less tax in the year which was required to be paid in order to avail amnesty from special audit

First Appellate Authority rightly ordered for acceptance of the returned income under the Self-Assessment Scheme as, the case was not hit by any disqualification enumerated in the Scheme

Departmental appeal was dismissed by the Tribunal.

Date of setting up or commencement of industrial undertaking, date of commencement of semi-finished product and date of commencement of fully manufactured product

Distinction drawn between semi-finished and fully manufactured product would not in any way prove that the industrial undertaking had not gone into production.

Exemption for self-occupied house was claimed as the house remained under the occupation of assessee even up to the date of valuation i.e. 30-6-1999 due to repairs and renovation to be carried out as per lease agreement

Assessing Officer adopted the Gross Annual Rental Value on the basis of annual rent on the valuation date

Validity

Rule 8(3), proviso, Wealth Tax Rules, 1963 puts some restrictions on the power of the Assessing Officer in estimating the gross annual rental value at a sum higher than the rent paid or, payable by the tenant

Superficially it would show that if the assessee's tenant had paid rent of a period shorter than a year, say for 8 days as in the present case, then Assessing Officer could not expand such amount to cover the whole year on that basis, in other words, it would appear that by virtue of R.8(3), proviso the Assessihg Officer was obliged to estimate annual rental value equal to the actual rent of 8 days only

Only actual rent received for 8 days be counted for the purpose of net wealth of assessee as for remaining period the house was in self-occupation of the assessee.

Assessee's case was excluded from BroadBased Self-Assessment Scheme on the ground that assessee's case for the assessment year 1996-97 was accepted under S.59-A and not under S.59(1) of the Income Tax Ordinance, 1979 and immunity for the assessment year 1997-98 was available only to those cases covered under S.59(1) and not to cases accepted under S.59-A of the Income Tax Ordinance, 1979

Validity

Requirement for qualification under the Scheme was that the tax paid on the basis of income declared for the assessment year 1997-98 was not less than the, tax payable for assessment year 1996-97

Assessee's return being covered within the relevant provision the question that the same was not finalized under Self-Assessment Scheme 1996-97 and was otherwise accepted under S.59 of Income Tax Ordinance, -1979 became irrelevant

No reason existed to select the case of assessee for normal assessment and the finding of the Tribunal was clear in all respects

Reference was refused to be sent to the High Court by the Tribunal.

Loss from dealing in stocks and shares was computable under the head "Capital Gain", as it was not liable to be set off against income, under any of the other heads as provided in S. 34 of the Income Tax Ordinance, 1979 and was liable to be carried forward in the light of provisions of S.37 of the Income Tax Ordinance, 1979.

Where order passed by the Assessing Officer was without jurisdiction and was cancelled by the Inspecting Assistant Commissioner being erroneous and prejudicial to the interest of Revenue, such order of I.A.C. was maintained by the Appellate Tribunal with the observation that the order passed by Assessing Officer was rather made in haste and without proper appraisal of the facts of the case.

Tax was determined Qa 6 % on the contract receipts being total receipts exceeding Rs. 30 millions under S.59A of the Income Tax Ordinance, 1979

Validity

Order passed under S.59A of the Income Tax Ordinance, 1979 after making inquiries and confronting the assessee could not be equated with an order deemed to have been passed under S.80-C(7) of the Income Tax Ordinance, 1979, even if the statement was filed under S.143-B of the Income Tax Ordinance, 1979 and the income was not properly chargeable under S.80-C of the Income Tax Ordinance, 1979

Proper course for .the Assessing Officer was to summon the return under S.56 of the Income Tax Ordinance, 1979 and then to make the assessment under the normal law

Order of the Assessing Officer was annulled by the Tribunal being passed without proper jurisdiction.

Such loan was assessed as `deemed income of the assessee for the assessment year 1995-96 which was confirmed by the First Appellate Authority

Assessee's contention was that provision of S.12(18A) was not applicable to the assessee's case as such provision of law was not the part of law at the time of framing of assessment same having been deleted by Finance Act, 1996

Validity

Repealed/omitted S.12(18A) of the Income Tax Ordinance, 1979 would be taken to be as available and applicable to the case of assessee which was a case for the assessment year 1995-96 and the assessee failed to repay the said loan within the time as prescribed in the omitted provision of law

Assessment was to be framed in accordance with the law which was applicable for the said assessment year

No concession was available if the assessment was not framed within the time when the law was in force because proceedings could continue for a longer period and then finalized and till that time there could be many changes in the law

Such position will create a complex situation if the law at the time of framing of assessment was made applicable irrespective of the fact as to what law was in force during the assessment year under consideration

Order of two Authorities below was confirmed by the Appellate Tribunal.

Department demanded sales tax, additional tax and penalties'after a period of three years without considering the tax already paid on the basis of invoice made for sample and not for sale

Validity

Sale of tank within the meaning of taxable supply of the storage tank under the Sales Tax Act, 1990 took place when the storage tank was supplied and sales tax was paid

No justification existed to charge sales tax at a value higher than the actual price or to demand additional tax and penalty as the tax was paid on the day of sale and the delay in the adjudication process was neither relevant nor attributable to the complainant

Order passed by the Department was declared to be arbitrary, unjust and based on irrelevant grounds which had no legal validity

Federal Tax Ombudsman recommended that Central Board of Revenue set aside order passed by the Deputy Collector (Adjudication-III), that directions should be issued to the Collector of Sales Tax to finalize the assessment on the basis of transaction value of the storage tank as on 1-12-1999 when the t able supply actually took place.

Proceedings under S.65 of the Income Tax Ordinance were initiated on the ground that the department was in possession of definite information that the value of the plot declared was understated as the minimum value determined under R.207A of Income Tax Rules, 1982 read with S.13(2) & (3) of Income Tax Ordinance, 1979 on the basis of Collector's Rate was higher than the declared value

Validity

At the time of making assessment in the presence of existing Rules it was open for the Assessing Officer to have evaluated the property on the basis of Collector's value instead of stamp duty valuation

Assessing Officer had made conscious decision by accepting the stamp duty value

Registrar, in case of doubt about the price of property, could make reference to the Collector to determine the value upon which stamp duty was to be paid but he failed to do so

Neither any definite information was with the Department nor misdeclaration was noticed and it was merely a change of opinion

Assessing Officer in wealth tax assessment had valued at the Collector's valuation much after the assessment had been framed by the Income-tax Officer

Subsequent order by the Wealth Tax. Officer valuing a property at Collectors Valuation rate which though available with the Income-tax Officer but was not adopted would not tantamount to definite information

Action taken by the Department was illegal and not according to law which fell within the category of mal-administration

Federal Tax Ombudsman recommended that notice under S.65 and proceedings in consequence thereof initiated against the complainant were illegal and of no legal effect and the same be closed and cancelled.

Assessee had died and assessment of entire property income was made in the hands of one legal heir/complainant and tax was demanded from him

Validity

Assessment had been framed in a very careless and casual manner

Assessment order served on the complainant did not bear any date, while the demand notice was served on the complainant alongwith the assessment orders

Recovery notice was served before the service of demand notice

Assessment framed foisting the entire liability of the estate of the deceased on the complainant was illegal

All the legal heirs of the original assessee should have been brought on record and demand notice under S.85 of the Income Tax Ordinance, 1979 should have been served after completion of assessment proceedings on the heirs before the issuance of the recovery certificate

Federal Tax Ombudsman recommended that the Commissioner Income Tax should cancel the illegal assessment creating an illegal demand on the complainant in exercise of powers vested in him under S.138 of the Income Tax Ordinance, 1979; if the limitation period permits, reassessment proceedings should be initiated in accordance with law on all the legal heirs according to their respective shares in inheritance of property and that disciplinary proceedings may be initiated under the Efficiency and Discipline Rules, 1973 against Assessing Officer for his acts of omission and commission who had little regard for the instructions issued by the Central Board of Revenue vide Circular C. No.7(2)(Dt 14/94, dated 24-1-1994.

Filing of declaration for any year shall not affect the pending assessment or reassessment for that years and the pending appeals will be heard and decided in the normal course

Pendency of appeal was not a bar to the filing of declaration nor the declaration was to effect the pending assessments

Condition imposed by C.B.R. Circular No.14 of 2000 that in a case that had been set aside and against which further appeal had been filed which was pending adjudication declaration could not be made under the Tax Amnesty Scheme, 2000

Adverse conditions could .be imposed by amending the Scheme and not by way of clarification and explanation

C.B.R. Circular was a clarification in respect of pending proceedings and object of clarification or explanation was to remove obscurity or ambiguity in any expression or phrase in the main provision

Explanation or clarification could not amend, limit or expand the scope and extent of the main provision

Provision of Tax Amnesty Scheme, 2000 could not be restricted or limited by clarification through C.B.R. Circular

Rejection of declaration was illegal and Federal Tax Ombudsman recommended that the declaration filed by the complainants under Tax Amnesty Scheme, 2000 be accepted and conveyed to the complainant as per requirement of para. 10(2) of C.B.R. Circular No.4 of 2000 and that Regional Commissioner of Income-tax should take suo motu action to cancel all proceedings including assessment framed in consequence of the rejection of the declaration filed by the complainant.

Regional Commissioner of Income-tax in a detailed, order had dealt with non-compliance of the three conditions viz., the industry was based on highly sophisticated technology; the technology applied had fast obsolescence and the investment undertaken involved high risk

Reasons advanced by the complainant with regard to the said issues were rejected on tangible grounds

First two conditions required evidence of technological nature to determine whether the complainant had complied with them at all

Complainant/assessee had not produced any documentary evidence or expert's opinion to show that they had complied with the first and second conditions. Department, with regard to the third condition had pointed out that in the final account submitted with the returns no investment/expenditure had been shown to have been incurred on R&D and since inception no machinery and equipment had been scrapped

Record showed that the complainant/assessee had produced ingots and had declared the sale at Rs.26,34,400 in the charge year 1997-98 and Rs.19,46,38,673 in the assessment year 1998-99 and no expenditure was shown to have been incurred on R&D which contradicted the claim of the claimant/assessee

Claim had been rejected on reasonable and legal grounds and the Department had not committed any maladministration

Claim of exemption was also rejected by the Federal Tax Ombudsman.

Circulars cannot override view of High Court or Supreme Court.

Selection of such cases through parametric method of selection was violative of para.6 of Self-Assessment Scheme for the year 2000-2001 and the same was without lawful authority and of no legal effect and in consequence thereof the notices issued to the assessees were also illegal and of no legal effect

Principles.

Share of Super tax payable by a registered firm could not be apportioned with reference to the share of the partner as computed under S.16(1)(b) of the Income-tax Act, 1922.

Provisions of S.66-A of .Income Tax Ordinance, 1979 being not procedural in nature could not have retrospective effect to touch the completed assessments before its introduction on the statute book

Principles.

Revised return filed under S. 57, Income Tax Ordinance, 1979 would not be deemed to be an amendment of the return under S. 55 and was not covered by the provision of S.59(1) of the Income Tax Ordinance,. 1979

Tribunal, in the light of C.B.R. Circular No. 13, dated 4-11-1981 was not justified to set aside the orders of the Assessing Authorities and direct that the assessment should be made under S.59(1) of the said Ordinance, if the case qualified to be assessed as such

Principles.

Share advance money indicated in the books of accounts/balance-sheet of the company could by no imagination be treated as loan

Principles.

Value of rented out house was declared by the assessee on the basis of Annual Rental Value after deduction of allowances for fittings and fixtures, and 25% deduction in gross annual rent

Department pointed out that rebate on account of Annual Letting Value pertaining to rentals of furniture, fittings and fixture was not available after the year 1994

Assessee readily admitted the same and house was assessed on the higher value against originally assessed

Additional tax was charged which was upheld by the Appellate Tribunal while interpreting the word "shall" used in S.31-B of the Wealth Tax Act, 1963 on the ground that its levy was mandatory

Validity

Assessee had never been contumacious nor had been guilty of actively concealing any fact from the Revenue

Assessee, after having been confronted, immediately agreed and offered to pay tax at the valuation

Additional tax or penalty thus should not have been imposed only for the reason that it was legally permissible to do so

Levy of additional tax in a mechanical manner being not justified in the facts of the case levy was cancelled by the High Court in circumstances.