MESSRS PAKISTAN TOBACCO LIMITED VS GOVERNMENT OF PAKISTAN
1991 P T D 355
[Karachi High Court]
Before Saleem Akhtar and Hussain Adil Khatri, JJ
Messrs PAKISTAN TOBACCO LIMITED
versus
GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance,
Islamabad and 3 others
Constitutional Petitions Nos.D-1041, D-1042 and D-1043 of 1989, decided on 31/01/1991.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65 & 53(1)---Where an assessee had been assessed under S.59(1), action under S.65 could be initiated only if subsequent to such assessment no order of assessment had been passed under S.65 or any other provision of the Ordinance---If after assessment under S.59(1) another assessment under S.65 or any other provision of the Ordinance had been framed, action under S.65 could not be taken.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65 & 59(1)---Assessment made under S.59(1) can be subjected to reassessment only once---Once assessment under S.59(J) haul teen made and :hereafter the income had been re-assessed or determined under S.65 or any other provision of the Ordinance, S.65(i)(c) would be a bar to the reopening of the assessment under S.65.
Once an assessment under section 59 (1) of Income Tax Ordinance, 1979 has been made and thereafter the income has been re-assessed or determined under section 65 or any other provision of the Ordinance, section 65(i)(c) will be a bar to the reopening of the assessment under this provision. This seems to be a protection afforded to the cases falling under the Self-Assessment Scheme. The cases falling under this scheme have been given immunity unless they are selected for total audit or disqualify for such assessment. Assessments made under section 59 (1) can be subjected to reassessment only once. Once a reassessment under any provision has been made after assessment under section 59 no further reassessment can be made by invoking section 65.
Sirajul Haq for Petitioner.
Shaikh Haider for Respondents.
Dates of hearing: 19th, 20th, 21st and 22nd November, 1990.
JUDGMENT
SALEEM AKHTAR, J.---The petitioner is a public limited company engaged in manufacturing cigarettes of various brands having its factories at Karachi, Jhelum and Akora Khatak. In the assessment year 1983-84 the petitioner submitted its return of income under section 55 of the Income Tax Ordinance under the Self-Assessment Scheme. It is alleged that it had filed full sets of statements of accounts together with all the computations required by law including a statement of salaries, perquisites and benefits for the purpose of clause (i) of section 24 of the Income Tax Ordinance, 1979. The Assessing Officer made assessment under section 59 (1). Thereafter the assessing officer after obtaining prior permission of the Inspecting Commissioner of Range I, Central Zone "A" Karachi, served a notice under section 65 of the Income Tax Ordinance in respect of the exemption claimed under clause 122 of the Second Schedule and the depreciation allowed to the petitioner. The petitioner supplied all the necessary documents and information and assessment was made under section 65/62 in which the claim of depreciation and exemption was substantially reduced. The incidence of tax was therefore raised and demand was made. Similarly assessments made for the assessment years 1984-85 and 1985-86 under section 59 were reopened on the same grounds and assessment was made creating a higher demand. These actions and demands were challenged in Petition No.571/89 which has been allowed and re-assessment has been ordered.
It seems that after reassessment under section 65 a complaint was received against the petitioner on the basis of which the assessments for the years 1983-84, 1984-85, 1985-86, 1986-87 and 1987-88 were again reopened. This petition relates to the assessment year 1983-84. The other petitions which are similar on facts relate to assessment years 1984-85, 1985-86. Petitions No.1044/89 and 1045/89 relating to assessment years 1986-87 and 1987-88 are different in nature as in these cases the assessment was not made under the Self-Assessment Scheme but originally the petitioner was assessed under section 62. By this' judgment we propose to dispose of petitions Nos.1041, 1042 and 1043/89 which are substantially on similar facts and grounds. In all these three cases originally the assessment was made under section 59 (i). Thereafter re-assessment was made under section 65 by reopening the case on the plea that tax-holiday the exemption under clause 122 of the Second Schedule and depreciation allowed were not validly and properly assessed. In all these cases second notice under section 65 has been issued which relates to the perquisites as claimed by the petitioner.
On receipt of the complaint against the petitioner the Inspecting Assistant Commissioner of Income Tax sent a copy of the same to the petitioner asking for clarification of various points raised therein. The petitioner clarified and denied the allegations made against it. It further requested that it was merely an attempt to blackmail a reputable assessee and that the case may be closed. It is alleged that all the material facts and statements in respect of the salaries and perquisites were on record and were duly adjudicated upon twice. However, respondent No.4 issued a show-cause notice dated 14-6-1989 alleging that the petitioner's income tax liability had not been properly assessed in the past as the amounts liable to be added under section 24 (i) on account of excess perquisite were reportedly more than the amount added in the assessment order and that the petitioner had wrongly claimed rebate on tax of export and sale of tobacco leaves. The petitioner by letter 22-6-1989 replied the letter refuting the allegations. Respondent No.4 called for further information regarding the bifurcation of the expenditure on welfare of employees which was duly replied on 27-6-1989. Thereupon respondent issued notice under section 65 of the Income Tax Ordinance for the assessment years 1983-84, 1984-85, 1985-86, 1986-87, 1987-88. The petitioner protested against such inquiry and to avoid ex parte reassessment filed the returns of income for all the five years which were the same as filed originally. Further information as required by the respondent No.4 and provided under sections 61 and 62 of Income Tax Ordinance were also furnished. Ultimately respondent No.4 issued a final notice under section 62 dated 4-10-1989. The matter was discussed by the Tax Consultant of the petitioner. This process of consultation continued till October, 1989 when by an assessment order dated 19-10-1989 was made which was duly served alongwith the demand notice. In the assessment order respondent No.4 has added the perquisites which were in the excess of permissible deduction. This amount was added to income of the petitioner resulting in demand for tax.
Mr. Sirajua Haq the learned counsel for the petitioner leas contended that the notice under section 65 and the assessment order passed thereon are without jurisdiction, as after assessment under section 59 (i) a re-assessment was made under section 65 and thereafter again it cannot be reopened. The contention of the learned counsel is based on section 65 (i) (c) of the Income Tax Ordinance Section 65 reads as follows:--
65. Additional assessment.---(1) If, in any year, for any reason --
(a)...............................................
(b)...............................................
(c) the total income of an assessee or the tax payable by him has been assessed or determined under subsection (1) of section 59 and no order of assessment has subsequently been made under this section or any other provision of this Ordinance,
the Income Tax Officer may, at any time, subject to the provisions of subsections (2), (3) and (4), issue a notice to the assessee containing all or any of the requirements of a notice under section 56 and may proceed to assess or determine, by an order in writing, the total income of the assessee or the tax payable by him, as the case may be, and all the provisions of this Ordinance shall , so far as may be, apply accordingly:
Provided that the tax shall be charged at the rate or rates applicable to the assessment year for which the assessment is made."
A perusal of this section. will show that a case where an assessee has been assessed under section 59 (i) action under section 65 can be initiated if subsequently no order of assessment has been passed under section 65 or any other provision of the Ordinance. If after assessment under section 59(1) another assessment under section 65 or any other provision of the Ordinance has been framed, action under section 65 cannot be taken.
Mr. Shaikh Haider the learned counsel for the respondent contended that after the order has been made under section 65 the original order merges with the order passed under section 59. Even if there is a merger as claimed by the respondent it does not save the situation because section 65 (i) (c) bars action under section 65 if subsequent to the assessment order under section 59 any assessment order has been made under section 65 or any other provision of the Ordinance. Therefore, once an assessment under section 59 (1) has been made and thereafter the income has been reassessed or determined under section 65 or any other provision of the Ordinance, section 65 (i) (c) will be a bar to the reopening of the assessment under this provision. This seems to be a protection afforded to the cases falling under the Self-Assessment Scheme. The cases falling under this scheme have been given immunity unless they are selected for total audit or disqualify for such assessment. Assessments made under section 59 (1) can be subjected to reassessment only once. Once a reassessment under any provision has been made after assessment under section 59 no further reassessment can be made by invoking section 65. Therefore, at the time when respondent No.4 issued the notice and made the assessment he had no jurisdiction to initiate that proceeding. However, as the assessment order made under section 65 on the first occasion was challenged in petition No.571/89 which has been allowed and the same has been set aside in law, the assessment order does not exist now. In that petition respondent has been permitted to reassess and determine the case according to law. In this process respondent No.4 after due notice to the petitioner would be entitled to even consider the question of perquisites and rebate which had not been taken note in the first reassessment order passed under section 65. .With these observations these petitions are allowed and we declare that the notice under section 65 and assessment in pursuance thereof are without lawful authority and of no legal effect.
M.B.A./P-184/KPetitions allowed.