INCOME TAX OFFICER VS M/S. SHAIKH GHULAM SHAH
1991 P T D 993
[Supreme Court of Pakistan]
Present: Zaffar Hussain Mirza, Naimuddin and Sajjad Ali Shah, JJ
INCOME TAX OFFICER and 2 others---Appellants
Versus
M/s. Shaikh GHULAM SHAH---Respondents
Civil Appeal No.6-K of 1986, decided on 18/06/1991.
(From the judgment of the High Court dated 5-11-1985 in C.P. D-136 of 1985).
Income Tax Ordinance (XXXI of 1979)---
----S. 59(1)---Self-Assessment Scheme (1982-83), C.B.R's Circular No.10 of 1982, dated 2nd August; 1982 paras 2(d)(A), 2(d)(i)(A) & (B), 2(d)(ii)(A), 4 & 9--- Registered firm---No account case---Requirements of Scheme---In case of individuals where no accounts are maintained by the assessee the requirement is to file trading and profit and loss account on estimate basis or receipt and expenditure estimate where trading account cannot be prepared---In case of registered firms only those registered firms who filed the required statements according to the nature of their business could claim the benefit of the Scheme-- If such registered firms do not maintain the accounts then they would not fulfil the conditions provided in paras. 2(d)(i)(A) & 2(d)(ii)(A) of the Scheme and thus returns filed by them would not qualify for assessment under the Self-Assessment Scheme.
One of the requirements of the Self-Assessment Scheme (1.982-83) is that a registered firm must file trading/manufacturing accounts, if applicable, i.e. where it carries on trading or manufacturing business and profit and loss account, balance-sheet and receipt and expenditure statements. Para 2, clause (d), sub clause (i)(A) of the Scheme relates to cases where no accounts are maintained, while clause (B) of the said Scheme relates to the cases where accounts are maintained. Where no accounts are maintained the requirement is to file trading and profit and loss account on estimate basis or receipt and expenditure estimate where trading account cannot be prepared. The case of registered firm is not dealt with under sub-clause (i)(A), it has been dealt with under sub clause (ii)(A) which is a separate clause relating to registered firms and companies. Therefore, only those registered firms who filed the required statements according to the nature of their business could claim the benefit of the Scheme. If they do not maintain the accounts, then they would not fulfil the conditions provided in para 2(d)(ii)(A) of the Scheme and thus the return filed by them would not qualify for assessment under the Self-Assessment Scheme.
If such registered firms wanted to avail the benefit of the Scheme, they should have filed alongwith the return the required statements.
The assessee having failed to comply with the conditions mentioned in para 2(d)(ii)(A) of the Scheme by not filing (1) Balance Sheet and (2) Profit and Loss Account in spite of notice, the return filed by them could have been assessed under section 59(1) of the Income Tax Ordinance, 1979 and not under Self -Assessment Scheme framed thereunder.
Unless an assessee firm or other assessee file the statements as required under various sub-paragraphs of the Scheme, the department cannot ever find out whether there is concealment of income or not. It is on study of Profit and Loss Account, Balance Sheet and Receipt and Expenditure Statement that the department may discover any concealment, if it is held otherwise then para 4(c) and para 9 of the Scheme would be rendered ineffective, which could not be the intention of the framers of the Scheme.
Shaikh Haider, Advocate Supreme Court and Muzaffar Hassan, Advocate-on-Record for Appellants.
Rehanul Hassan Naqvi, Advocate Supreme Court and M.S. Ghaury, Advocate-on-Record for Respondents.
Dates of hearing: 17th and 18th June, 1991.
JUDGMENT
NAIMUDDIN, J: --This is an appeal, by leave, from the judgment of the High Court of Sindh dated 5-11-1985 passed in Constitutional Petition No.D-136 of 1985 in the following circumstances.
2. The respondent is a partnership firm of contractors. They filed their return of income for the assessment year 1982-83 under the Self Assessment Scheme for 1982-83 contained in Circular No.10 of 1982 (Income Tax), dated 2nd August, 1982 and declared an income of Rs.2,81,227 and claimed immunity from detailed scrutiny under the Scheme.
3. The Income-Tax Officer by the letter dated 7th December, 1982, informed the respondents that the return of income was not accompanied by the following details/statements/documents/information which are necessary for qualifying the assessment under Self-Assessment Scheme
(1) Balance Sheet
(2) Trading Account
(3) Profit and Loss Account
By this letter the Income Tax Officer required the respondents to furnish the above documents by 22-12-1982 to enable him to complete their income tax assessment for the year in question.
4. Against this requirement, the respondents, through their Advocate, addressed a letter dated 27th January, 1983 to the Commissioner of Income-tax, stating that since it was a case of no account of contractor the only requirement in the case of the contractor which has been prescribed vide the above mentioned Circular was that where any sub-contractor is claimed, name, address and details of payment and nature of sub-contract was to be given with the return, which was not tile case in this case.
5. The Commissioner of Income-tax, in reply to the letter of respondents' invited respondents, attention to para 2(B)(ii) of the Circular in question and stated that the assessment will be framed under section 59(1) of the Income-tax Act, 1922 only when respondents' rile a trading, profit and loss account and income and expenditure account.
6. This led the respondents to rile a representation before the appellant No.3, the Central Board of Revenue, which by its order dated 27-1-1983, conveyed its inability to accede to the request of the respondents. Thus, being aggrieved by the aforesaid orders, the respondents filed a Constitution petition in the High Court, which was allowed by the impugned judgment by declaring the orders dated 7-12-1982, 28-2-1983 and 27-1-1985 to be without lawful authority and of no legal effect and further declaring that the respondents' case was liable to be assessed under the Self Assessment Scheme.
7. In the petition filed in the High Court the respondents applied for interim relief. On service of notice the Advocate for the appellants stated that the Department would not proceed with the matter till the final disposal of the petition provided the petition was fixed for regular hearing in the first week of May, 1985. By consent, order was passed by the High Court accordingly and the application was disposed of in terms of the statement made by the counsel for the appellants.
8. It was contended by Mr. Shaikh Haider, learned counsel for the appellants that the High Court erred in allowing the petition and holding that the respondent was entitled to be assessed under the Self Assessment Scheme and quashing the notice issued by the Income Tax Officer, Contractor Circle IV, West Zone, Karachi dated 7-12-1982, requiring the filing of profit and loss account etc. and declaring the order dated 28-2-1983 passed by the Commissioner of Income tax, West Zone, Karachi and the order dated 27-1-1985 passed by the Central Board of Revenue, the appellants before us, as without lawful authority and of no legal effect.
9. Now, before proceeding to examine the contentions, we would like to refer to the relevant provisions of Self Assessment Scheme for the year 1982-83 contained in Circular No.10 of 1982 (Income Tax). Under the heading `Scope of the Scheme' it is provided that all returns filed for the assessment year 1982-83 shall be self-assessment returns provided:
they do not carry the disqualification listed in para 4, and
(ii) subject to the conditions given below.
Under para 2 of the Scheme the following statements, accounts, details and documents were mandatorily required to be filed alongwith the return of the income. The clause reads as follows:
"(a) Salary cases Not relevant
(i)...... ..Not relevant
(ii)...... ..Not relevant
(b) Property cases...... ..Not relevant
(i)...... ..Not relevant
(ii)...... ..Not relevant
(iii)...... ..Not relevant
(c) Cases of income from other sources: ...... ..Not relevant
(i)...... ..Not relevant
(ii)...... ..Not relevant
(iii)...... ..Not relevant
(d) Business income.
(i) In the cases of individuals, HUFs, URFs, and AOPs;
(A) Where no accounts are maintained:
(1) Trading and profit and loss account on estimate basis, or receipt and expenditure statement where trading account cannot be prepared.
(2) Evidence of claim for investment allowance.
(B) Where accounts are maintained:
(1) Trading/manufacturing accounts; profit and loss account and balance sheet; receipt and expenditure statement, where applicable.
(2) Copies of the personal accounts of the persons or members or the proprietors.
(3) Evidence of claim for investment allowance.
(ii) In case of Registered Firms and Limited Companies:
(A) Trading/manufacturing accounts, profit and loss account and balance sheet; receipt and expenditure statement wherever applicable.
(B) Copies of personal accounts of partners/directors.
10. Mr. Shaikh Haider on the basis of para 2 of clause (d), sub-clause (B)(ii), (A) and (B) argued that the respondents being a registered firm of contractors, were liable to file profit and loss account, balance sheet and receipt and expenditure statement. He submitted that since the respondents were not a registered trading/manufacturing firm, but were a registered firm of contractors, they were not required to file trading/manufacturing account, and the words `wherever applicable' used in the clause refer to the nature of business carried on by the registered firms or the limited liability companies. If they carry on trading or manufacturing business then they would be required to file trading or manufacturing accounts, but if they do not carry on the business of trading or manufacturing but other business like that of a contractor-- as in the case of the appellant - then they would be required to file profit and loss. account, balance -sheet and receipt and expenditure statement.
11. The High Court while dealing with the interpretation of the expression `wherever applicable' observed as follows:
"The words "wherever applicable" appearing in 2(d)(b)(ii) of Circular 10 of the 1982 means "in any case in which the word `applicable' means "germane, fit and relevant".
His submission is that the words "wherever applicable" mean wherever applicable and not to all registered firms and limited companies whether they maintain accounts or not.
A reading of the above paragraph will show that where the assesses has tiled an income tax return under the self-assessment scheme and has complied with all the requirements of the scheme, the assessment is to be made by the Income Tax Officer under the Scheme. In the instance case, it is admitted position that the petitioner does not maintain an) book of accounts:'
12. In the above observations, the High Court appears to be in error when it observed that the assessee has complied with all the requirements of the Scheme. One of the requirements of the Scheme is that a registered firm must file trading/manufacturing accounts, if applicable, i.e. where it carries on trading or manufacturing business and profit and loss account, balance-sheet and receipt and expenditure statements. It will be seen that para. 2, clause (d), sub-clause (i)(A) relates to cases where no accounts are maintained, while clause (B) relates to the cases where accounts are maintained. It would further appear that where no accounts are maintained the requirement is to file trading and profit and loss account on estimate basis or receipt and expenditure estimate where trading account cannot be prepared. The case of registered firm is not dealt with under sub-clause (i)(A), it has been dealt with under sub-clause (B)(ii)(A) which separate clause relating to registered firms and companies. Therefore, it appears that only those registered firms who filed the required statements according to the nature of their business could claim the benefit of the Scheme. If they do not maintain the accounts, then they would not fulfil the conditions provided in para. 2(d)(B)(ii)(A) of the Scheme and thus the return filed by them would not qualify for assessment under the-self-assessment scheme.
13. It was, however, vehemently argued by Mr. Naqvi that under the provisions of the Company Law limited liability companies are required to maintain account books but registered firms are not required under any law to maintain account books. That may be so, nonetheless, if such registered firms want to avail the benefit of the Scheme, they should have filed alongwith the return the required statements, which the respondents not only failed to do but challenged the demand of the Department for filing such statements before the Departmental heirarchy as well as before the High Court.
14. It was also argued by Mr. Naqvi that if there is ambiguity in a fiscal enactment it should be resolved in favour of the subject, not in favour of the Revenue or, if two interpretations of a provision in a fiscal or penal statute are possible then one in favour of the subject should be adopted. The principle is well-established and needs citation of no precedent or authority to support it. However, we regret, we are unable to find any ambiguity in the Scheme. The Scheme is applicable to all returns of income, excepting those specifically excluded under Para 4 of the Scheme if they fulfill the conditions mentioned in the Scheme. But, the return filed by the respondents does not comply with the condition mentioned in para 2(d)(B)(ii)(A) of the Scheme. The respondents failed to comply with the same by not filing (1) Balance-Sheet and (2) Profit and Loss Account in spite of notice. Therefore, the return filed by them could have been assessed under section 59(1) of the Income Tax Ordinance, 1979 and not under Self-Assessment Scheme framed thereunder.
15. We may add that unless an assessee firm or other assessees file the statements as required under various sub-paragraphs of the Scheme, the department cannot ever find out whether there is concealment of income or not. It is on study of Profit and Loss Account, Balance-Sheet and Receipt and Expenditure Statement that the department may discover any concealment, if we hold otherwise then para 4(c) and para 9 of the Circular would be rendered ineffective, which could not be the intention of the framers of the Scheme.
16. Accordingly, we allow this appeal but, in the circumstances of the case leave the parties to bear their own costs.
M.BA./I-146/SAppeal allowed