MESSRS SHADMAN INTERNATIONAL (PVT.) LTD., KARACHI VS INCOME-TAX OFFICER, KARACHI AND OTHERS
1991 P T D 387
[Karachi High Court]
Before Nasir Aslam Zahid and Mukhtar Ahmed Junejo, JJ
Messrs SHADMAN INTERNATIONAL (PVT.) LTD., KARACHI
versus
INCOME-TAX OFFICER, KARACHI and others
Constitutional Petition No.1141 of 1987, decided on 29/10/1990.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 65---Assessee, on a notice under S.65 furnished all details and explanations and after examination of the case, matter was compromised and an agreement was reached with the Income-tax Officer and pursuant to said agreement, a further addition was made to the total assessed income of the assessee and further tax was also levied ---Assessee, after the said order of the I.T.O., however was served with another show-cause notice followed by a notice under S.65 and was informed that after the issuance of first notice under S.65 and passing of the order, a report had been received from the IA.C. (Survey and Collation) to the effect that assessee's total income was under-assessed as price of plot of land purchased by him was grossly understated as against the prevailing market price by giving reference to the sale of plot of land which was adjacent to the plot in question---Held, report from the I.A.C. (Survey and Collation) gave fresh/new factual information and on basis of said information collected/received after previous assessment, Income-tax Officer was entitled to issue another show-cause notice under S.65 and it was not a case where the Income-tax Officer lacked jurisdiction to issue a notice under S.65.
Edulji Dinshaw Limited v. Income-tax Officer PLD 1990 SC 399; Arafat Woollen Mills Ltd. v. Income-tax Officer 1990 SCMR 697; Jeson International (Pvt.) Ltd. v. Income-tax Officer 1989 PTD 1141; Republic Motors Ltd. v. Income-tax Officer 1990 PTD 889; Car Tones v. Income-tax Officer PLD 1989 Kar. 337 = 1989 PTD 478 and Income-tax Officer v. Panama Private Ltd. (1974) 97 ITR 210 ref.
Wali Traders v. Income-tax Officer 1988 PTD 206 fol.
(b) Constitution of Pakistan (1973)---
----Art. 199---Constitutional jurisdiction of High Court---Scope---High Court does not lightly deprive the hierarchy of Tribunals, their jurisdiction under the relevant special statute, unless it is shown that the impugned action is patently without jurisdiction or is coram non-judice or mala fide and that it would be a futile exercise if the case is allowed to be proceeded with before the Tribunal concerned and would expose a party to unnecessary harassment.
Wali Traders v. Income-tax Officer 1988 PTD 206 fol.
Rehan Hasan Naqvi for Petitioner.
Waheed Farooqi for Respondents.
Date of hearing: 29th October, 1990.
JUDGMENT
NASIR ASLAM ZAHID, J.---Petitioner is an income-tax assessee and this matter relates to the assessment of the petitioner for the year 1985-86. According to the petitioner, its assessment for the year 1985-86 was in the first instance finalised under the Self-Assessment Scheme under section 59 of the Income Tax Ordinance, 1979 but the same was re-opened under section 65. According to the petitioner, its Managing Director furnished all details and explanations and after examination of the case the matter was compromised and on 28-2-1987 an agreement was reached with the Income-tax Officer and pursuant to this agreement, for the year 1985-86, a further addition of Rs.6,00,000 was made to the total assessed income of the petitioner and a further tax amounting to Rs.3,31,080 was levied and paid by the petitioner. This order was passed by the Income-tax Officer on 28-2-1987. However, petitioner was thereafter served with another show cause notice dated 6-5-1987 by the Income-tax Officer, which is reproduced here:--
1. You are aware, that your assessment for charge year 1985-86, stands completed a/s. 65/62 at total income of Rs.7,75,045 since 28-.02-1987. However, information received from the office of worthy Inspecting Assistant Commissioner of Income Tax (Survey 8c. Collation), Karachi on 06-05-1987 has revealed, that your total income for "the year" has been under assessed.
2. This office has been informed, that plot No. 158/S, Block-2, P.E.C.M. Society, Karachi admeasuring 1000 square yards, purchased by your company on 05-12-1984, for a reported value of Rs.8,35,000 was a gross understatement. The market value of the plot, at the relevant time was much higher.
3. This office has further been informed that, the plot No. 158-R, Block-2, P.E.C.H. Society, Karachi admeasuring 1000 square yards - adjacent to your plot (your plot No. is 158/S) was purchased by N.D.F.C. on 03-11-1983 (about a year before your 'deal) for a value of Rs.59,00,000. Both the plots are situated on main Tariq Road and are exactly comparable.
4. In view of above facts, you are requested to furnish your explanation on following points:--
(i) What were the special circumstances, that you were able to purchase the plot under consideration, at a price many times lower, than the actual market rate.
(ii) Why the reported purchase price may not be held as an intentional understatement.
(iii) Why your purchase price may not be estimated at the then prevalent market rates.
(iv) Why your assessment for charge year 1985-86 may not be re-opened on account of under assessment.
This show cause notice may be replied on or before 12-05-1987. If no compliance is made, or your reply is found unsatisfactory, an adverse inference may be drawn:'
2. This show cause notice was followed by a notice under section 65 of the Ordinance and is dated 14-4-1987. The Income-tax Officer then issued a notice under section 61 of the Ordinance and fixed 27-9-1987 as the date of hearing. The petitioner, being aggrieved by the impugned notice under section 65 of the Income-tax Ordinance, 1979, filed this Constitution petition in this Court on 26-9-1987. The petition was admitted to regular hearing by order dated 28-9-1987 and, on the application for stay, notice, was ordered and by order dated 19-10 1987, stay of the proceedings before the Income-tax Officer Was granted. In the order dated 23-6-1988, it was noticed that more than 6 months had expired since the passing of the order of stay and by an application moved by the petitioner in which it was informed that Income-tax Officer had issued a notice under section 61 of the Ordinance and steps were being taken for finalization of the assessment order, this Court passed an order to the effect that the Income-tax Officer may complete the assessment proceedings but the order of assessment would not be implemented for a period of 6 months. Thereafter the order of the assessment was finalized and on 5-4-1989 the Income-tax Officer served the order of assessment on the petitioner on the basis of action taken on notice under section 65 of the Ordinance creating a further demand of Rs.15,40,025. An application for amendment of the petition was filed to challenge the order of assessment also, which application was granted and an amended petition was filed.
3. We have heard at length the arguments of Mr. Rehan Hasan Naqvi, learned counsel for the petitioner and Mr. Waheed Farooqi, learned counsel for the department. It has been noticed that in para 10 of the amended memo of petition it is stated that against the assessment order, the petitioner has filed an appeal which is pending before the appellate Authority, i.e. The Appellate Commissioner of Income-tax.
4. The contention raised by Mr. Rehan Hasan Naqvi, learned counsel for the petitioner, is that the show-cause notice issued under section 65 of the Income-tax Ordinance is, in the circumstances of this case, without jurisdiction and as a result subsequent proceedings taken on the basis of such notice and the assessment order are also without jurisdiction and liable to be quashed. On a query from the Court, Mr. Rehan Hasan Naqvi conceded that even after finalization of proceedings under section 65 of the Ordinance a second notice under section 65 can be given but according to the learned counsel fresh proceedings can only be initiated if definite information is made available to the .Income-tax Officer after the first order has been passed. According to the learned counsel, in the present case, no fresh information was brought to the notice of the Income-tax Officer and what is mentioned in the show-cause notice dated 6-5 1987 is only an opinion of the Survey & Collation Wing of the Income-tax Department and even if it was information, it related to the sale price of another property namely, Plot No. 158/R, which was sold one year earlier than the purchase of plot No. 158/S by the petitioner company. In support of his contention that the impugned notice under section 65 of the Ordinance has been issued without jurisdiction by the Income-tax Officer, learned counsel has relied upon the following reported judgments:--
(i)Edulji Dinshaw Limited v. Income-tax Officer P L D 1990 SC 399.
(ii) Arafat Woollen Mills Ltd. v. Income-tax Officer 1990 S C M R 697.
(iii) Jeson International (Pvt.) Ltd. v. Income-tax Officer 1989 P T D 1141.
(iv) Republic Motors Ltd. v. Income-tax Officer (1990) P T D 889.
(v) Car Tonls v. Income-tax Officer P L D (1989) Kar. 337 = 1989 P T D 478.
(vi) Income-tax Officer v. Panama Private Ltd (1974) 971 T R 210.
5. Mr. Waheed Farooqi, learned counsel appearing for the Income-tax Department, submitted that this was not a case of lack of jurisdiction of the Income-tax Officer and admittedly an appeal had been filed by the petitioner against the final assessment order. According to the learned counsel for the department, no case has been made out by the petitioner for interference under the constitutional jurisdiction. Mr. Waheed Farooqi has relied upon the following reported judgments:--
(a) Wali Traders v. Income-tax Officer 1988 P T D 206.
(b) Zafar Usman v. Income-tax Officer 1989 P T D 547.
(e) Harz Muhammad Arif Dar v. Income-tax Officer P L D 1989 SC 109 = 1989 P T D 485.
6. In P L D 1990 SC 399, it was held that once all the facts have been fully disclosed by the assessee and considered by the Income-tax Authorities and-the assessment have been consciously completed, and no new fact has been discovered, there can be no scope for interference with these concluded transactions under the provisions of section 65 on the ground that the income chargeable to tax under the Ordinance has escaped assessment or has been under assessed.
The other judgments relied upon by the learned counsel for the petitioner are also to the effect that without there being some new fact or facts the concluded transaction cannot be reopened by a notice under section 65 of the Ordinance. It has also been held that change in the information or interpretation of any instrument does not entitle the department to reopen an assessment under section 65 of the Ordinance.
7. In this petition, a counter-affidavit has been filed on behalf of the department and it was averred that after the issuance of the first notice under section 65 and passing of the order dated 28-2-1987, a report had been received from the office of the Inspecting Assistant Commissioner of Income-tax (Survey & Collation) dated 29-4-1987, a copy whereof has been annexed to the counter affidavit. Para. 2 of the said report dated 29-4-1987 is as follows:--
"2. The information collected by the survey department revealed that the assessee purchased plot No. 158/S Block 2 P.E.C.H.S., Kyc. measuring 1000 Sq. yds. for Rs.8,35,000 on 5-12-1984. Plot No. 158/R Block 2 which is immediately adjacent to the plot purchased by the assessee company was purchased by N.D.F.C. on 03-11-1983 for Rs.59,00,000 (a Rs.5,900 per Sq. Yds) The area of the plot purchased by N.F.D.C. is also 1000 Sq. yds. and faces Tariq Road in the same manner as the assessee's plot. The purchase price of Rs.8,35,000 is quite low as compared with the market value rate as discussed above. This fact has also been communicated in verification note No. Jud-Misc/86-87/2042, dated 13-4-1987."
8. Mr. Rehan Hasan Naqvi, learned counsel for the petitioner had described this report of the Survey and Collation Wing of the Income-tax Department as an opinion and argued that the information stated in the report related to another plot and on the basis of this report a show-cause notice under section 65 could not have been issued and was incompetent and without jurisdiction. We are unable to agree with the contention of the learned counsel. The plot purchased by the petitioner bears No.158/S whereas the plot purchased by the N.D.F.C. one year earlier bears No.158/R. Both plots have the same area i.e. 1000 Sq. yds. The plots are adjacent to each other and face Tariq Road, Karachi. Suffice to observe that the aforesaid report dated 29-4-1987 gives fresh/new factual information and on the basis of this information collected/received after the previous assessment, the Income-tax Officer was entitled to issue another show-cause. notice under section 56 of the Ordinance. It is not a case where the Income-tax Officer lacked jurisdiction to issue a notice under section 56. After the show-cause notice, the assessment order has been finalized by the Income-tax officer and the petitioner has also filed an appeal against the assessment order, which is pending before the Appellate Commissioner of Income-tax. In our view, in the circumstances of this case, the petitioner has not been able to make out a case for interference by this Court under its constitutional jurisdiction. We may, with advantage, refer to para. 6 of the judgment of a Division Bench of this Court authored by Ajmal Mian, J. in the case of Wali Traders v. Income-tax Officer 1988 P T D 206, which reads as follows:--
"6. It may be observed that barring 3 cases in which constitutional jurisdiction was exercised, all the other cases relied upon by Mr. Rehanul Hagan Naqvi pertain to Income-tax references before the High Court. It is a well-settled principle of law that the High Court will not lightly deprive the hierarchy of Tribunals, their jurisdiction under the relevant special statute, unless it is shown that the impugned action is patently without jurisdiction or is coram non-judice or mala fide and that it will be a futile exercise if the case is allowed to be proceeded with before the Tribunal concerned and will expose a party to unnecessary harassment. In the present case we would not like to express our view on the merits of the case but we may observe that respondent No.1 in his letter, dated 28-9-1986 addressed to the petitioner (Annexure `F to the petition ) had attempted to demonstrate that it was not possible that the figure of purchases amounting to Rs.7,43,786 would include the closing stock for the year ending on 31-12-1951 and, therefore, at this stage it cannot be said that the impugned notice had been issued without any basis or foundation. It is true that the trading accounts of the year were before the Income-tax Officer when he finalised the assessment order but apparently he did not notice that they did not contain the figure of the closing stock which was given in the trading accounts of the previous year. It seems to be an accidental omission which might have resulted into escapement of the assessable income. It is not a case in which the Income-tax Officer had noticed the above fact and dilated upon it and then passed the assessment order or that the above fact was noticed by an appellate forum and dilated upon. If that would have been the case, the petitioner might hive a case for invoking constitutional jurisdiction. We are inclined to hold that it is not a case in which the impugned notice is patently without jurisdiction nor it is a case of coram non-judice or mala fides warranting the attraction of the constitutional jurisdiction. The petitioner may contest the notice before the Income-tax Officer, then before the Appellate Assistant Commissioner in case the Income tax Officer decides against him and then before the Income-tax Appellate Tribunal and thereafter, in an Income-tax Reference before the High Court. The petitioner has the above remedies available under the law which cannot be allowed to be by-passed at this stage."
We are in respectful agreement with the enunciation of law in para. 6 of the said judgment.
9. This Constitution Petition is accordingly dismissed but with no order as to costs.
M.BA./S-688/K Petition dismissed.