I.T.A. NO. 1960/KB OF 1994-95 VS I.T.A. NO. 1960/KB OF 1994-95
1997 P T D (Trib) 1143
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and S.M. Sibtain, Accountant Member
T.A. No. 1960/KB of 1994-95, decided on 01/01/1997.
(a) Interpretation of statutes---
----Principles---Provision of law has to be interpreted in the context of whole scheme of law keeping in view the spirit of law as emerging in the totality of the scheme.
It is an established principle of the interpretation of statutes that a provision of law in any statute is not to be interpreted in isolation but has to be examined in the context of entire scheme of the statute and taking into consideration all other relevant provisions in the statute. Thus, it is always imperative to examine and consider the scope of a particular provision of law in the totality of the scheme envisaged by the Legislature in the entire statute of which a provision of law is a part. In the context of a fiscal statute it becomes more important to consider a provision of law in the context of whole scheme keeping in view the spirit of law as emerging in the totality and entirety of the scheme.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.50, 80-C & 2(6)---Tax on income of importer of commercial goods-- Deduction of tax at source---Condition precedent for deducting/collecting tax under S.50 of the Income Tax Ordinance, 1979 is that the amount, receipt, profit or gain of the value of any goods or articles is income or deemed income and the amount deducted or collected is to be on account of payment of tax on behalf of assessee, within the provisions contained in S.50(8)(b) & S.50(9)(b) of the Ordinance---If a person is not an assessee or the amount received, accrued or arisen to him is not income or deemed .income or tax is not payable thereon, no deduction or collection is to be made under S.50 of the Ordinance---If, however, income of a person has already been assessed under any provision of Ordinance and the tax or any other sum of money payable under the Ordinance has already been paid such person no more remains assessee for the purpose of creating any charge.
The tax is deductible/collectible from the income of an assessee, which is liable to the charge of tax under the Ordinance either under normal law or under the presumptive tax regime. The income-tax is to be charged on the total income of an assessee as determined on completion of assessment or on the deemed income in certain cases under the normal assessment and under the presumptive tax regime, as well. However, in whatever manner the income is determined the condition precedent for levy of income-tax is that there should be income and until and unless specifically provided in the statute the income-tax cannot be levied twice on the income of an assessee in the same income year as the income-tax is an annual charge. If any deviation is to be made there has to be clear, unambiguous and independent provision for such charge. In the absence of any such provision the income-tax can be levied on the income of an assessee only once in an assessment year. The condition precedent for deducting/collecting tax under section 50 of the Income Tax Ordinance is that the amount, receipt, profit or gain of the value of any goods or article is income or deemed income and the amount deducted or collected is to be on account of payment of tax on behalf of assessee, within the provisions contained in section 50(8)(b) and section 50(9)(b) of the Income Tax Ordinance.
The above provisions are to be read with the provisions contained in section 80-C(1)(2), (3) and (4) of the Income Tax Ordinance. A perusal of the above provision shows that the expressions "income", "tax" and "assessee" are to be kept in view. If a person is not an assessee or the amount received, accrued or arisen to him is not income or deemed income or tax is not payable thereon no deduction or collection is to be made under section 50 of the Income Tax Ordinance.
A perusal of the definition of assessee as given in section 2(6) of the Income Tax Ordinance, 1979 shows that assessee is a person who is liable to pay any tax or any other sum of money under the Income Tax Ordinance and to respect of whom any proceeding under the Income Tax Ordinance has been taken for the assessment of his income or income of any other person in respect of which he is assessable. Thus, if income of a person has already been assessed under any of the provisions of the Income Tax Ordinance and the tax or any other sum of money payable under the Income Tax Ordinance has already been paid such person no more remains assessee for the purpose of creating any charge. The above observation is subject to the condition that the assessment once completed is, liable to be reopened or revised or rectified or enhanced by recourse to the relevant provisions contained in the Ordinance but all these proceedings should have nexus to the original assessment proceedings or the income determined in the original assessment order.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.9---Charge of income-tax---If income of a person has already been assessed under any provision of the Income Tax Ordinance, 1979 and the tax or any other sum of money payable under the Ordinance has already been paid such person no more remains assessee for the purpose of creating any charge.
(d) Income Tax Ordinance (XXXI of 1979)---
----Ss.50 & 80-C---Tax on income of importer of commercial goods-- Deduction of tax at source---When an assessee on import of commercial goods is made to pay tax under S.50(5) of the Ordinance it would be deemed to be final discharge of the tax liability under the Ordinance in respect of said goods and not in respect of import only---Once advance tax is collected under S.50(5) of the Ordinance the same assessee in respect of such goods would not remain assessee for the purpose of determination of his income or levy of tax because it would amount to levy of double tax which is not legal---Where the assessee has no income other than the income referred to in S.80(1) of the Ordinance in respect of which tax has been deducted or collected, the tax deducted or collected under S.50 shall be deemed to be final discharge of his tax liability under the Ordinance.
A perusal of subsection (4) of section 80-C shows that it is provided therein that where the assessee has no income other than the income referred to in subsection (1) in respect of which tax has been deducted or collected the tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under the Ordinance. The Legislature has intentionally used the expression "deducted or collected" and not "deducted and collected" for the obvious reason that the deduction and collection of advance tax under section 50 visualized two different situations and deal with two different set of circumstances. The deduction applies to the payments received by an assessee on supply of goods, contracts etc. while collection becomes relevant in case of imports only. In both the cases by virtue of deeming provisions the entire payments have been deemed as income and for the purpose of collection of tax the entire value of the imported goods has been treated as income. The intention of law is very clear that an assessee whose deemed income has either been subjected to deduction of tax or collection of tax, would be deemed to have discharged final tax liability under the Income Tax Ordinance.
Under subsection (4) of section 80-C .the discharge of final tax liability is in respect of an assessee vis-a-vis the deduction or collection of tax under section 50 and is not restricted to the import of goods only for the simple reason that mere import of goods is of no avail. Either it has to be used by an industrial undertaking as raw material for its own consumption which has been taken out of the purview of section 80-C or it has to be further sold or supplied and only then the transaction would be completed. Thus when an assessee on import of commercial goods is made to pay tax under section 50(5) it would be deemed to be final discharge of his tax liability under the Income Tax Ordinance in respect of the said goods and not in respect of import only and, therefore, once advance tax is collected under section 50(5) the same assessee in respect of same goods would not remain assessee for the purpose of determination of his income or levy of tax because it would amount to levy of double income-tax for which there is no clear and unambiguous sanction in law.
(e) Income Tax Ordinance (XXXI of 1979)---
----Ss.50 (4) & 80-C---Tax on income of importer---Deduction of tax at source---As soon as a person has suffered the incidence of tax by way of collection under S.50(4) of the Income Tax Ordinance, 1979 an assessment would be deemed to have been made in respect of income pertaining to the imported goods---By virtue of such collection the assessee shall be deemed to have discharged his final tax liability under the Ordinance and no further deduction is to be made---Provision of S.80-C(2)(a)(i) of the Ordinance will not be applicable on such supplies.
(f) Interpretation of statutes---
---- Deeming provisions---Things are to be taken to their logical conclusion.
(g) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C(5) & 13---C.B.R. Circular No.12 of 1991, dated 30-6-1991-- Tax on income of importer---Deduction of tax at source---Deemed income -- O*ct of S.80-C(5) of the Income Tax Ordinance, 1979---Purpose behind incorporation of S.80-C(5) of the Ordinance is to give effect to the provisions of S.13 of the Ordinance---Any excess amount referred to in S.13 of the Ordinance can be assessed under the normal procedure provided by the Ordinance---Assessing Officer has to first identify the source of income before invoking the provisions of S.80-C(5) of the Ordinance---Entire amount representing payments on which tax is deductible under S.50(4) of the Ordinance other than payment on account of service rendered and the amount as computed for the purpose of collection of tax under S.50(5) in respect of goods imported, not being goods imported by an industrial concern as raw material for its own consumption, shall be treated to be deemed income of an assessee---Tax on such goods shall be charged at the rate specified in the First Schedule of the Ordinance---When the tax on such income has been deducted or collected the tax deducted or collected under S.50 of the Ordinance shall be deemed to be final discharge of the tax liability under the Ordinance.
Messrs Prince Glass Works and others v. C.B.R. 1995 PTD 856 fol.
(h) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C (5) & 13---Tax on income of importer of commercial goods-- Deduction of tax at source---Whether provisions contained in S.80-C(5) of the Ordinance can be applied while considering the income referred to in S.80-C(1)---Principles elucidated---Deemed income---Unexplained income-- Procedure.
The provisions contained in subsection (5) of section 80-C cannot be applied while considering the income referred to in subsection (1) of section 80-C. The Assessing Officer has no jurisdiction at all to make either any assessment in respect of the income referred to in subsection (1) of section 80-C or any scrutiny for the simple reason that in respect of such income an assessment order under section 59-A shall be deemed to have been made if the tax is deducted or collected and the deduction or collection under section 50 is itself deemed to be final discharge of tax liability of an assessee by the force of law. However, if in any-assessment proceedings under normal law in respect of an income other than the income referred to in section 80-C and outside the presumptive tax regime to which section 80-C is applicable, an assessee or any investment or money or valuable article or any expenditure and the assessee while explaining the nature and source of any sum, investment, money, valuable article, excess amount of expenditure takes into account any source of income which is subject to tax in accordance with the provisions of section 80-C, he shall not be entitled to take credit of any sum as in excess of an amount which if taxed at a rate or rates other than rate applicable to income chargeable to tax under section 80-C, would have resulted in tax liability equal-to the tax payable in respect of income under section 80-C.
An addition under section 13(1)(a) can be made if an assessee offers no explanation about the nature and source of such sum, or the explanation offered by him is not, in the opinion of Deputy Commissioner, satisfactory. Thus, the condition precedent for deeming income under section 13 has been sought to be overruled under the cover of provisions contained in subsection (5) of section 80-C. Subsection (1) of section 80-C starts with the non obstante clause and likewise subsection (3) also starts with the non obstante clause, while subsection (5) of section 80-C does not start with the non obstante clause and it simply contains that, where an assessee while explaining the nature and source of any sum etc. referred to in section 80-C he shall not be entitled to take credit of any sum in excess of imputable income in accordance with the provisions contained in subsection (5) of section 80-C. Thus the provision contained in subsection (5) of section 80-C does not overrule or override any of the provisions contained in section 13 of the Income Tax Ordinance, 1979. Subsection (5) of section 80-C has been promulgated as a matter of concession to an assessee who wants to take benefit of presumptive income to cover up the unexplained sum etc. mentioned in section 13. It means that if during the normal assessment proceedings an Assessing Officer has identified any unexplained sum etc. and while -explaining the said sum etc. an assessee takes into account a source of income which is not subjected to tax in accordance with the provisions of section 80-C, subsection (5) of section 80-C shall not apply. If an assessee takes into account a source of income which is subjected to tax in accordance with the provisions of section 80-C and he is able to explain the nature and source and is able to prove that the sum or investment etc. is the profit from the transaction, income whereof is governed under the presumptive tax regime under section 80-C, even then subsection (5) of section 80-C shall not apply for the simple reason that in such situation no addition can be made under section 13 because the source and nature of the sum, investment etc. is fully explained by an assessee and any sum, investment etc. the nature and source whereof is explained by an assessee cannot be deemed to be income of an assessee chargeable to tax under the Ordinance by recourse to section of the Ordinance. However, if an assessee takes into account a source of income which is subjected to tax in accordance with the provisions of section 80-C and is not able to produce evidence to show that the sum, investment etc. forms part of profit earned from the transaction of business falling within the presumptive tax regime under section 80-C then the Legislature has extended a concession or benefit to such an assessee that he can take credit of a sum to the extent of imputable income under section 80-C(5). The rationale of this benefit is that under the provisions contained in section 80-C an assessee is not required to file any return of total income, no regular assessment is to be held, no allowances or deductions are to be allowed, no refund to tax deducted or collected or set off of any loss under any provisions of the Ordinance is to be allowed and the entire imports of commercial goods are to be treated as deemed income and tax is-to be charged at the rate specified in the First Schedule and likewise in the case of supplies of goods or execution of a contract etc. with the Government, local authority, a company or a registered firm etc. the entire payment is to be treated as income and is subjected to tax. For these reasons an assessee may venture not to maintain an account and, therefore, if at any subsequent stage an assessee is not able to produce evidence of the profit earned on such income and he is called upon by an Assessing Officer to explain the nature and source of any sum, investment etc. he can get benefit to the extent of imputable income under subsection (5) of section 80-C without production of any evidence while explaining the nature and source of any sum, investment etc.
Assessing Officer would be wrongly invoking the provisions contained in subsection (5) of section 80-C, without identifying any unexplained sum, investment etc. and making an assessment order on the basis of statement under section 143-B of the Ordinance, would be absolutely without jurisdiction.
(i) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C & 143-B---Tax on income of importer of commercial goods-- Loss of rental income of assessee cannot be adjusted against income under S.80-C of the Ordinance---Assessing Officer, on the basis of statement under S. 143-B of the Ordinance, which is in the nature of information only cannot proceed to make an assessment order.
(j) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C, 50, 59-A, 62, 143-B & 13---Tax on income of importer of commercial goods---Deemed income---Deduction of tax at source-- Addition---Property income---As soon as deduction or collection of tax is made the assessment order is deemed to be made under S.59-A of the Ordinance by virtue of the provisions contained in S.80-C(7) of the Ordinance---When an assessment is already made under S.59-A with the collection of tax, no further assessment can be made under S.62 of the Ordinance---Assessing Officer would fall in serious error by treating the statement under 5.143-B of the Ordinance as the return of total income and making assessment under S.62 in respect of the income under S.80-C-- Entire assessment order excluding property income. w therefore, without jurisdiction and on that score also both the additions made under 5.80-C(2)(a)(i) read with S.50(4) and under S.13(1)(a) read with S.80-C(5) were without jurisdiction and liable to be struck off.
(k) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C, 55, 56 & 65---Income of importer of commercial goods-- Return of total income ---Notice---Assessee, in respect of income referred in S.80-C(1) of the Ordinance, is not required to file any return of total income under S.55 of the Ordinance---No notice, therefore, can be issued to an assessee for furnishing return of total income under S.56 or under S.65 for additional assessment---Reasons recorded.
In respect of income referred to in subsection (1) of section 80-C an assessee is not required to file any return of total income under section 55 and, therefore, no notice can be issued to an assessee for furnishing return of total income under section 56 and likewise no notice can be issued under section 65 for the simple reason that in the case of reopening of assessment under section 65 the requirements of notice under section 56 become applicable and the assessment is completed under section 62 which cannot be done in respect of an income referred to in subsection (1) of section 80-C. The reason is that in case of import of commercial goods there' is no question of any concealment as the Collector of Customs is required to collect advance tax computed on the basis of value of such goods as increased by the customs duty and sales tax if any, levied thereon at the rates specified in the First Schedule. Likewise in the case of payment in full or in part including a payment by way of advance tax to any person resident on account of supply of goods or the execution of a contract with the Government or a local authority or a company or a registered firm or any foreign contractor or consultant or consortium where the total value in any financial year of goods supplied or contract executed exceeds fifty thousand rupees the payer is bound to take advance tax at the time of making such payment at the rate specified in the First Schedule and as such there is no question of any concealment. No allowance or deductions are to be allowed and likewise no refund of tax or set off of any loss is to be made and as such in respect of an income referred to in subsection (1) of section 80-C no occasion would arise to invoke the provisions contained in section 65 and thus normal provisions of assessment contained in the Ordinance shall not be attracted.
(l) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C, 50, 52, 56, 65 & 143-B---Tax on income of importer of commercial goods---Deduction of tax at source---Protection of revenue-- Remedy.
Persual of section 52, Income Tax Ordinance, 1979 shows that in the case of any default by any person saddled with the responsibility of deducting or collecting the tax he shall be deemed to be an assessee in default in respect of such tax in addition to any other liability he may incur under this Ordinance. Thus, the Legislature has taken care of; and there is no possibility of loss of revenue in the case of default on the part of any person, responsible for deducting or collecting the tax under section 50(4) and, section 50(5) which is relevant for the purpose of income referred to in':. subsection (1) of section 80-C. Thus, if on perusal of statement under section 143-B, an Assessing Officer finds that any default has taken place, he can have recourse to the provisions contained in section 52 instead of k embarking on calling upon an assessee to file a return of total income under section 56 or 65 or to venture in entering into exercise of making regular assessment under section 62 which is absolutely prohibited under section 80-C.
(m) Income-tax---
----Presumptive tax regime---Benefits.
The presumptive tax regime has provided various protections to assessee as well in addition to protecting the State revenue and to dispel the idea that the presumptive tax regime is always arbitrary or oppressive. In fact, the presumptive tax regime appears to be arbitrary or oppressive because of the misinterpretation of various provisions and wrong applications thereof by the Department. The presumptive tax regime in fact has on the one hand introduced various deeming provisions and on the other hand has curtailed various discretions of the departmental officers, which, in the final analysis, has created an equilibrium provided the different provisions are applied correctly and in harmony to each other.
Messrs Prince Glass Works and others v. C.B.R. 1995 PTD 856; 1996 PTD (Trib.) 1128; Commissioner of Inland Revenue v. Frank Bernard Sandarsun 8 TC 38; Laxmipat Singhania v. C.I.T., U.P. (1969) 72 ITR 291; P.I.D.C. v. Pakistan 1992 SCMR 891 = 1992 PTD 576; 1997 PTD (Trib.) 301 and Messrs Ittehad Chemicals Ltd. v. I.A.C. Income Tax, Range-5, Lahore (1996) PCTLR 730 (Trib.) ref.
Rehan Hassan Naqvi for Appellant.
Shaheen Aziz Niazi, D. R. for Respondent.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---This appeal at the instance of assessee (hereinafter referred to as the appellant) is directed against the order, dated 13-3-1995 by the learned C. I. T. (A), Zone-II, Karachi in I.T.A. No.59 of 1995 relating to the assessment year 1994-95.
2. The appellant a private limited company has assailed the orders of the learned two officers below on the following grounds:---
"(1) That the learned Commissioner of Income-tax Appeals 2, Karachi has erred in confirming the application of section 80-C(2)(a)(i) of the Income Tax Ordinance, 1979 to the sales amounting to Rs.15,57,04,745 to Jaffer Brothers (Private) Limited by treating them as supplies and subjecting them for tax at the rate of 2.5 per cent.
(2) That the learned Commissioner of Income-tax Appeals 2, Karachi has erred in giving a finding that in the case of the appellant the provisions of section 50(4) of the Income Tax Ordinance, 1979 are applicable as M/s. Jaffar Brothers (Pvt.) Limited being a limited company was required to deduct tax under the provisions of section 50(4) while making payment to the appellant.
(3) That the learned Commissioner of Income-tax Appeals 2, Karachi has erred in .rejecting the claim of the appellant that once the payment under section 50(5) of the Income Tax Ordinance, 1979 has been made on imports the appellant has discharged full and final liability on account of taxes.
(4) That the learned Commissioner of Income-tax Appeals 2, Karachi has erred in holding that subsection (4) of section 80-C of the Income Tax Ordinance, 1979 covers whole of section 50 of the Income Tax Ordinance, 1979 which according to him means inclusion of subsections (4) and (5) of section 50 of the Income Tax Ordinance, 1979.
(5) That the learned Commissioner of Income-tax Appeals 2, Karachi has erred in confirming the invocation of section 80-C(5) read with section 13 of the Income Tax Ordinance, 1979 in the case of the appellant and subjecting to tax the difference between net profit declared and credited in the balance sheet amounting to Rs.2,65,91,469 and imputable income which amounts to Rs.1,32,41,341.
(6) That the learned Commissioner of Income-tax Appeals 2, Karachi was not justified in confirming the addition of Rs.1,32,41,341 to the income of the appellant."
3. Heard Mr. Rehan Hassan Naqvi, learned counsel for the appellant and Mr. Shaheen Aziz Niazi, learned representative for the department.
4. The facts giving rise to the present appeal are that the appellant filed a statement under section 143-B of the Ordinance declaring commercial imports of Rs.12,97,81,127 on which tax was collected at the rate of 2% under section 50(5) of the Ordinance, which was claimed to be the full and final discharge of tax liability relating to the imports. The assessing officer, however, observed that the appellant made sales worth Rs.15,75,04,746 during the year under reference to M/s. Jaffer Brothers (Pvt.) -Limited. According to the assessing officer the said company M/s. Jaffer Brothers (Pvt.) Limited was under legal obligation to deduct tax on account of payments to the appellant by virtue of the provisions contained in section 50(4) of the Income Tax Ordinance, 1979 which made all the payments on account of sales to M/s. Jaffer Brothers (Pvt.) Limited liable for tax deduction. No deduction of tax was made and, therefore, the appellant was called upon to explain the position with reference to section 80-C(2)(a)(i) of the Income Tax Ordinance, 1979.
5. The appellant replied that the query as to why the sales effected by the appellant's company, in respect of their imported goods, for which a statement under section 143-B was filed, should not be treated as supply sales to M/s. Jaffer Brother (Pvt.) Limited and tax under section 80-C should not be charged, contains its explanation in subsection (4) of section 80-C itself which reads as follows:---
"Where the assessee has no income other than the income referred to in subsection (1) in respect of which tax has been deducted or collected, the tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under this Ordinance and he shall not be required to file the return of total income under section 55:
Provided that, in respect of the assessment year commencing on the first day of July, 1991, where the tax deducted or collected in the preceding financial year under subsection (4) or subsection (5) of section 50 is less than the tax payable under this section, the tax so deducted or collected shall not constitute full and final discharge of the tax liability of the assessee and shall be required to pay the amount representing the difference between the tax payable under this section and the tax so deducted or collected and all the provisions of this Ordinance shall apply accordingly."
6. It was contended on behalf of the appellant that from a perusal of above provision it was quite clear that if the tax on imports has been deducted or collected under section 50 it shall be deemed to be final discharge of the tax liability under the Ordinance. Thus, from the language of subsection (4) of section 80-C it was clear that once the tax on imports has been collected under section 50(5) from an assessee no further tax could be charged on the sales of such total goods as it will be contrary to the provisions of subsection (4) of section 80-C. The assessing officer observed that subsection (1) of section 80-C provides for any amount as outlined in subsection (2) being received or accruing to any assessee to be the deemed income and such deemed income or amount has been specified in the case of resident as under:---
"(i) The amount representing payments on which tax is deductible under subsection (4) of section 50 other than payments on account of services rendered;
(ii) The amount as computed for the purposes of collection of tax under subsection (5)ofsection 50 in respect of goods imported, not being goods being imported by an industrial undertaking as raw material for its own consumption."
7. Thus according to assessing officer an amount in respect of which tax is deductible under subsection (4) of section 50 also constituted the deemed income under section 80-C of the Ordinance together with the amounts on which tax has been collected under section 50(5) of the Ordinance. The assessing officer came to the conclusion that the assessees' liability under section 80-C would be discharged only when the tax under clause (a)(i) and (ii) of subsection (2) of section 80-C stands paid. He, therefore, held that the appellant was liable to pay tax on account of sales/supplies amounting to Rs.15,57,04,746 at the rate of 2.5% which came to Rs.38,92,618.
8. The second issue relating to addition under section 13 read with section 80-C(5) arose out of the following circumstances.
9. An amount of Rs.2,65,91,469 was found to be credited in the books of account and was claimed to be net profit declared by the appellant in its profit and loss account for the current year. The assessing officer sought explanation in this behalf from the appellant with particular reference to the provision of section 80-C(5) of the Income Tax Ordinance, 1979 read with section 13 of the Income Tax Ordinance. The appellant furnished explanation vide letter dated 10-10-1994 which reads as follows:---
"Subsection (5) of section 80-C provides for method of determining the amount of which an assessee (who had been deriving income which is subject to tax in accordance with the provisions of this section) can take credit of while explaining the nature and source of any sum, investment, money, valuable article, expenditure referred to in section 13. It has been laid down that in such a case that income shall be taken to the amount on which tax works equal to the amount of tax paid under section 50(4) or 50(5) without investment allowance.
From the above language it is quite apparent that the assessee can take the benefit of presumptive income under the said section in order to cover up any unexplained investment as enumerated in section 13. From this it is quite clear that presumptive income is not the real income but a concession has been allowed to the assessees who want to take the benefit of presumptive income to cover up unexplained investment mentioned in section 13. Nowhere it is laid down in subsection (5) of section 80-C, that the presumptive income is the real income. In the case of assessee-company, the real income as per P and L Account has been credited in the balance Sheet and the provisions of section 13 are not attracted as the source of this amount is fully explained in the Trading and P and L account from which the income has arisen. The income as per P and L Account being the real income, the provisions of section 13, are not attracted. It is clearly laid down that the provisions of said sections are applicable where there is an unexplained investment. In the case of assessee-company the amount credited in the P and L Account and the balance sheet is not the unexplained investments being the real income. Since there is no unexplained investment or amount in the balance-sheet, the assessee has not derived any benefit of presumptive income. It is only a concession granted by the Central Board of Revenue to the tax-payers which does not mean that the presumptive income is real income.
In the circumstances, the question of any reconciliation, therefore, does not arise. "
10. The assessing officer did not accept the explanation for the reason that clause (5) of section 80-C of the Ordinance clearly stipulates that while explaining the nature of source of income an assessee shall not be entitled to take credit of sum as is in excess of an amount which if taxed at the rate other than the rate applicable to income chargeable to tax under this section would have resulted in tax liability equal to tax payable in respect of income under this section. Thus, the credit is admissible for the income which is attributable to tax deduction or deducted under sections 50(4) or 50(5) of the Ordinance. The balance income being in excess of such attributable income is to be taxed under provisions of section 13 of the Ordinance. With these observations the assessing officer worked out the imputable income according to tax deducted or deductible under section 50(4) and collected under section 50(5) which amounted to Rs.64,86,256 and the imputable income was worked out at Rs.1,32,41,341 the benefit of which was allowed to the assessee and the balance amount which came to Rs.1,33,63,775 was added to the total income under section 13(1)(aa) of the Income Tax Ordinance, 1979.
11. In the above manner a tax liability under section 50(4) read with section 80-C was created at Rs.38,92,618 and under section 13(1)(aa) read with section 80-C(5) at Rs.65,35,020.
12. The appellant being dissatisfied preferred first appeal reiterating the convention that the goods imported by the appellant were already subjected to tax under section 80-C at the import stage and, therefore, it could not be subjected to tax again on its sale when the collection of tax at import stage was in full and final discharge of the tax liability of the appellant. The invoicing of provisions contained in section 80-C(5) read with section 13 of the Income Tax Ordinance, 1979 was also assailed and the reliance was placed on the judgment of Honourable Sindh High Court in the case of M/s. Prince Glass Works and others v. C.B.R. 1995 PTD 856. The learned C.I.T. (A) did not accept the contentions and held that the assessing officer was justified in subjecting to tax the supplies made to M/s. Jaffer Brother (Pvt.) Limited under section 80-C(2)(a)(i) of the Income Tax Ordinance at 2.5 % because the provisions of said section were squarely applicable where the tax was deducible under subsection (4) of section 50 of the Income Tax Ordinance. the learned C.I.T. (A) further held that since the sales/supplies were made to a limited company the tax was deducible under section 50(4). The contention that once tax was collected under section 50(5) on imports, the appellant discharged its full and final tax liability was not accepted for the reason that subsection (4) of the section 80-C made reference to whole section 50 and not only to section 50(5). According to the learned C.I.T.(A) subsection (4) of section 50 is referred in section 80-C but the deduction/collection under this provision would not be deemed to be full and final discharge of the tax liability until and unless taxes under all the provisions of section 50 were deducted/collected.
13. So far the application of section 80-C(5) read with section 13 is concerned the learned C.I.T.(A) held that the Honourable Sindh High Court merely set aside the assessment order for de novo proceedings in accordance with the parameters laid down in the judgment and, therefore, the treatment meted out by the assessing officer required no interference.
14. Being still dissatisfied the appellant has preferred this second appeal before us.
15. On the first issue Mr. Rehan Hasan Naqvi has submitted that after payment of tax at Rs.25,95,638 under section 50(5) of the Income Tax Ordinance on the commercial imports of the value of Rs.12,97,81,127 the appellant discharged its full and final tax liability by virtue of the provisions contained in subsection (4) of section 80-(C) of the Income Tax Ordinance, 1979. According to Mr. Naqvi the assessing officer was not justified in invoking the provisions of subsection (2) of section 80-C of the Income Tax Ordinance, 19,79 and held that the appellant was liable for deduction of tax under section 50(4) of the Income Tax Ordinance at Rs.38,92,618. He has submitted that the assessing officer has subjected one transaction to the levy of tax twice. He has contended that the commercial import of goods and sale thereof amounts to one transaction in its totality and in normal course under the ordinary law, the ultimate income earned by the assessee was liable to be subjected to the levy of income tax. However, by virtue of the presumptive tax regime the entire imports were deemed as income and were subjected to the collection of tax which was treated as full and final discharge of the tax liability and as such the sale of same goods could not be subjected to the deduction of tax again and it would amount to levy of tax twice on the same income. Mr. Naqvi has further submitted that it is, provided in section 80-C(4) that where the assessee has no income other than referred to in subsection (1) in respect of which tax has been deducted or collected, the tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under this. Ordinance and he shall not be required to file the return of total income under section 55. It means that if the tax has been collected under subsection (5) of section 50 or is deducted under subsection (4) of section 50 it would be deemed to be final discharge of the tax liability of an assessee under the Ordinance. Elaborating his contention Mr. Rehan Hasan Naqvi has submitted that the word "or" in section 80-C(4) has been used by the Legislature in disjunctive sense which means that either collection of the tax under subsection (5) of section 50 or deduction of tax under subsection (4) of section 50 would be treated as final discharge of tax liability. He has proceeded to argue that the learned two officers below have fallen in error by holding that in the case of appellant titre collection of tax under subsection (5) of section 50 and deduction of tax .under subsection (4) of section 50 in respect of the same goods would cumulatively amount to full and final discharge of the tax liability.
16. Mr. Rehan Hasan Naqvi has next contended that the learned two officers below have misdirected in holding that an assessee's liability under section 80-C would be discharged only when the tax under clause (a)(i) and (ii) of subsection (2) of section 80 stands paid. He has submitted that under subsection (4) of section 80-C a reference is made to the income referred to in subsection (1) of section 80-C and subsection (1) of section 80-C in term refers to subsection (2) of the said section which in the case of resident visualizes two different situations. Para. l of the clause (a) of subsection (2) of section 80-C refers to the payments on which tax is deductible under subsection (4) of section 50, while para. 2 of clause (a) of subsection (2) refer` to the amount on which tax is to be collected under subsection (5) of section 50 in respect of goods not being goods imported by an industrial undertaking as raw material for its own consumption. Thus according to Mr.Taqvi if the provisions contained in subsections (1), (2) and (4) of section 80 are read together the only inference which can be drawn would be that in either of the situations an assessee is absolved of his total liability of tax under the Ordinance. He has contended that in the case of import of commercial goods the situation visualized under para. 2 of clause (a) of subsection (2) of the section 80-C shall always occur first because at the very impotentstage the tax shall be collected under 'subsection (5) of section 50 and soon as the tax is collected under subsection (5) of section 50, it would be deemed to be the final discharge of an assessee's tax liability under the Income Tax Ordinance, by virtue of the provisions contained in subsection (4) of section 80-C and thereafter the situation visualized under para.1 of clause (a) of subsection (2) of section 80-C shall never operate. Mr. Naqvi has proceeded on the argue that the reason for his contention is that it is provided in para. 1 of clause (a) of subjection (2) of section 80-C that it is applicable to the amount representing payments on which tax is deductible under subsection (4) of section 50 meaning thereby that if no tax is deductible under subsection (4) of section 50 this provision shall not be operative. He has submitted that the provisions contained in section 50 of the Income Tax Ordinance, 1979 relate to the payment of tax before assessment and, therefore, section 50 is not an independent, section. In support of his contention he has placed reliance on a Single Bench judgment of this Tribunal reported as 1996 PTD (Trib.) 1128 wherein it has been held that the provisions contained in section 50 are not independent provisions as it deals with the advance payment of tax in the shape of deductions and collections before the assessment and all such deductions or collections are subject to adjustment of taxes on income from various s6urces classified under section 15 of the Income-tax Ordinance. Thus, the provisions contained in section 50 are to be read with other provisions contained in the Income Tax Ordinance, 1979 creating charge and dealing with various sources of income. It has been further held that the provisions contained in section 50 are not to be read in insulation as the deduction or collection under section 50 are to be adjusted from the final tax liability on completion of assessment. He has, therefore, maintained that before making any deduction or collection under section s 50 a final tax liability has to exist and if no final tax liability exists or as in the case of appellant the final tax liability has been discharged by virtue of the provisions contained in subsection (4) of section 80-C because of collection of tart under subsection (5) of section 50, no tax is deductible under subsection (4) of section 50. In short his contention is that as the final tax liability of the appellant under the Ordinance stood discharged at the very import stage no further tax liability existed for the realization of which advance tax could be deducted under subsection (4) of section 50.
17. Mr. Naqvi has next contended that on one passage of money no income-tax can be levied twice. In support of his contention he has placed reliance in a case from Indian jurisdiction, the Commissioner of Inland Revenue v. Frank Bernard Sandarson 8 T.C. 38. He has further placed reliance on the judgment of Supreme Court of India in Laxmipat Singhania v. C.I.T., U.P. (1969) 72 ITR 291 wherein it has been held that, "it is a fundamental rule of the law of taxation that unless otherwise expressed provided, income cannot be taxed twice. "Mr. Naqvi has further placed reliance on the following passage in the judgment of Hon'ble Supreme Court of Pakistan in the case of P.I.D.C. v. Pakistan 1992 SCMR 891 = 1992 PTD 576:
"Section 55 clearly provides that super-tax will be in addition to the income-tax on the total income of the previous year at the rate laid down for that year by the 'Central Act'. According to section 56 total income as assessed for the purposes of income tax shall be total income for purposes of super-tax. Section 58 applies to the provision of Income Tax Act relating to charge, assessment, collection and recovery of income-tax and super-tax as well. Super -tax is, therefore, independent, separate and quite distinct from income-tax. It is a tax in addition to income-tax on the total income of the assessee. It is not an income-tax levied again on the free reserve treating it to be an income. Super-tax can be levied even without declaring or treating free reserve as an income. Even if amendments made in section 2(6-C) and section 4 by adding Explanation 5 are ultra vires the Constitution, it will not affect the levy made under section 55 of the Act at the rate provided by para.4 of part II A on the Fifth Schedule to the Finance Act, 1967. There can hardly be any dispute that the entire 'free reserve' is a Part of the total income assessed to Income-tax, under para. 4 of Part II of the Fifth Schedule super-tax has been levied on that amount of the free reserve which though part of the total income, exceeds the paid up ordinary share capital of the company. The petitioner can object that it amounts to double taxation the same income which has been subjected to income-tax. As discussed above in the absence of any prohibition or limitation by constitution or law the Legislature can impose tax twice over or the same amount or income. Super-tax has been levied in addition to income-tax by a clear and independent provision for whose charge, assessment and recovery procedure has been provided by section 58. The Legislature by clear unambiguous and in definite terms levied super-tax on the total income determined for purposes of income-tax. In these circumstances even if it amounts to double taxation it cannot be struck down. As we have held that the amendment made in section 2(6-C) of the Income Tax Act by Finance Act 1967 and Explanation 5 added to section 4 of the Income Tax Act by Finance Act, 1968, are ultra vires of the Constitution of 1962, the Free Reserve on which super-tax at the rate provided by law has been charged, cannot in the subsequent years, be again treated as income and. subjected to super-tax."
18. He has maintained that according to the Hon'ble Supreme Court of Pakistan a tax can be imposed twice on the same amount or income but it should be in clear, unambiguous and in definite terms. Mr. Naqvi has submitted that the levy of tax twice on the income of appellant is not to be inferred and if there is any ambiguity or doubt or two interpretations are possible the one in favour of assessee is to be adopted more particularly when it is a clear case of hardship and discrimination. Explaining the contention that the view taken by departmental officers is discriminatory Mr. Naqvi has submitted that if an importer after payment of tax under section 50(5) sells the imported goods to buyers who are not limited companies or registered firms no deduction under section 50(4) is to be made by such buyers. However, if the sales/supplies are made of the same goods to the limited companies or registered firms the department seeks to apply the provisions contained in section 50(4) read with section 80-C (1) and subsection (2) (a)(i) of the said section. It means that discriminatory treatment is being given to the two assessees deriving income from the same business under the same circumstances but with reference to the different buyers. Mr. Naqvi has contended that this treatment is absolutely against the very concept of law of income-tax.
19. The learned D.R. has supported the impugned orders of the learned two officers below. We have carefully considered the contentions raised by the learned representatives for the parties and have perused various provisions of law. Our findings are as under.
20. Mr. Rehan Hasan Naqvi, learned counsel for the appellant has raised very important questions of law which require in depth examination. It is an established principle of the interpretation of statutes that a provision of law in any statute is not to be interpreted in isolation but has to be examined in the context of entire scheme of the statute and taking into consideration all other relevant provisions in the statute. Thus, it is always imperative to examine and consider the scope of a particular provision of law in the totality of the scheme envisaged by the Legislature in the entire statute of which a provision of law is a part. In the context of a fiscal statute it becomes more important to consider a provision of law in the context of whole scheme keeping in view the spirit of law as emerging in the totality and entirety of the scheme. Keeping this principle in view we would like to examine the relevant provisions on which arguments have been addressed before us.
21. As already explained in the earlier part of this order the first controversy between the parties is to the applicability of the provisions contained in section 80-C(2)(a)(i) of the Income Tax Ordinance, 1979, The contention of the appellant/assessee is that it has already discharged its final tax liability under the Income Tax Ordinance by virtue of the provisions contained in subsection (4) of section 80-C with the collection of tax under ,subsection (5) of section 50 in respect of the commercial import of goods which were subsequently sold to a sister concern and once a final tax liability under the Ordinance is discharged the provision contained in section 80-C(2)(a)(i) shall not be attracted. On the other hand, the view taken by the departmental officers is that notwithstanding the discharge of tax liability on collection of tax under subsection (5) of section 50 at the import stage of the goods, the subsequent sale/supply thereof would attract the provision contained in section 80-C (2)(i). In short the view of the departmental officers is that the collection of tax under section 50(5) of the income Tax Ordinance shall have the effect of discharging the final tax liability relevant to imports only and shall not intend to the subsequent sale/supply of the same goods and the subsequent sale/supply of the same goods would attract the provision contained in section 80-C, subsection (1) and subsection (2)(a)(i) read with section 50(4)(a), and the final tax liability shall be deemed to be discharged after the tax is collected and deducted both. The departmental officers have taken this view for the reason that subsection (4) of section 80-C speaks of the entire section 50 and not section 50(5) only.
22. Before proceeding further it would be appropriate to reproduce the relevant sections of the Income Tax Ordinance requiring consideration which are as follows:--
"50(4). Notwithstanding anything contained in this Ordinance,---
(a) Any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person, being resident, (hereinafter referred to respectively as 'payer' and 'recipient'), on account of the supply of goods or for service rendered to, or the execution of a contract with the Government, or a local authority, or a company, or a registered fir1n, or any foreign contractor or consultant or consortium shall, deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, if any, in which the 'said date', as referred to therein, falls, whichever is the later:
Provided that the provisions of this clause shall, mutatis mutandis, apply to any payment made on or after the first day of July, 1992, to any non-resident person as they apply to any payment made to a resident recipient of account of execution of a contract for construction, assembly or like project in Pakistan:
(b) The Commissioner may, on any application made by any such recipient and after making such enquiry as he thinks fit, allow, by an order in writing, any person responsible for making such payment not to deduct any tax from any payment or payments made to such recipient in any financial year; and where such order is made, the person responsible for making any payment shall thereafter, and until such order is cancelled, make such payment without deduction of tax under clause (a);
Provided that
(i) Nothing contained in clause (a) or clause (b) shall apply to any payment made on account of the refund of any security deposit; and
(ii) Nothing contained in subsection (10) shall apply to companies as payers.
(4-A) Any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person, on account of brokerage or commission on behalf of Government, a local authority, a company, a registered firm, a foreign contractor or consortium shall deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, if any, in which the 'said date', as referred to therein, falls, whichever is the later.
50(5). Notwithstanding anything contained in any law for the time being in force---
(a) the Collector of Customs shall, in the case of every importer of goods, collect advance tax computed, on the basis of the value of such goods as increased by the customs duty and sales-tax, if any levied thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such importer for the assessment year commencing on the first day of July, next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, in which the said date, as referred to therein, falls, whichever is the later;
(b) The tax under clause (a) shall be collected in the same manner and at the same time as the customs duty, as if such goods (even though exempt from such duty) were liable to such duty, and all the provisions of the Customs Act, 1969 (IV of 1969) shall, so far as may be, apply accordingly:
Explanation.--As used in this subsection,-- (i) 'value', in relation to any goods, means the value as determined under section 25 of the Customs Act, 1969 (IV of 1969), as if the goods were subject to ad valorem duty; and
(ii) Collector of Customs means a person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969) and includes a Deputy Collector of Customs, an Assistant Collector of Customs or an Officer of Customs appointed as such under the aforesaid section.
Section 80-C. Tax on income of certain contractors and importers.--- (1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to any person the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the First Schedule.
(2) The amount referred to in subsection (1) shall be the following,
(a) Where the person is a resident---
(i) The amount representing payments on which tax is deductible under subsection (4) of section 50, other than payment on account of services rendered;
(ii) The amount as computed for the purpose of collection of the tax under subsection (5) of section 50 in respect of goods imported, not being goods imported by an industrial undertaking as raw material for its own consumption; and
(b) Where the person is non-resident, the amount representing payments on account of execution of a contract for construction, assembly or like project in Pakistan on which tax is deductible under subsection (4) of section 50.
(3) Nothing contained in this Ordinance shall be so construed as to authorise any allowance or deduction against the income as determined under subsection (1) or any refund of tax deducted or collected under section 50 or set off of any loss under any provision of this Ordinance. ,
(4) Where the assessee has no income other than the income referred to in subsection (1) in respect of which tax has been deducted or collected, the tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under this Ordinance and he shall not be required to file the return of total income under section 55:
Provided that, in respect of the assessment year commencing on the first day of July, 1991 where the tax deducted or collected in the preceding financial year payable under this section, the tax so deducted or collected shall not constitute full and final discharge of the tax liability of the assessee and he shall be required to pay the amount representing the deference between the tax payable under this section and the tax so deducted or collected and all the provisions of this Ordinance shall apply accordingly.
(5) Where an assessee, while explaining the nature and source of any sum, investment, money valuable article, excess amount or expenditure, referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of this section, he shall not be entitled to take credit of any sum as is in excess of an amount which if taxed at a rate or rates, other than the rate applicable to income chargeable to tax under this section, would have resulted in tax liability equal to the tax payable in respect of income under this section.
(6) For the purpose of determining the share of a partner of a firm out of such income of the firm as is determined under section 80-B or this section, the said income of the firm shall be taken to be an amount which if taxed at the rate or rates, other than the rate applicable to income chargeable to tax under section 80-B or this section, would have resulted in tax liability equal to the tax payable in respect of income under section 80-B or this section.
(7) In a case to which subsection (4) applies, an order under section 59-A shall be deemed to have been made in respect of income referred to in subsection (1).
23. The, first contention of Mr. Rehan Hasan Naqvi is that the learned two officers below have misread the provision contained in subsection (4) of section 80-C by holding that the final tax liability of an assessee to whom section 80-C is applicable shall be deemed to be discharged when the tax is deducted and collected both under section 50 of the Income-tax Ordinance, 1979. He has drawn our attention to the provisions contained in subsection (4) of section 80-C according to which if an assessee has no income other than the income referred to in subsection(1) of section 80-C in respect of which tax has been deducted or collected the tax deducted or collected under section 50 shall be deemed to be the final discharge of the tax liability. We find force in his contention that the Legislature has used expression "or" in-between the words "deducted" and collected" which cannot be read as "and". There appears to be substance in the contention of Mr. Rehan Hasan Naqvi that under the presumptive tax regime the entire concepts of the original income-tax law have undergone complete change. Under the normal provisions contained in the Income Tax Ordinance, 1979 income-tax is charged under section 9 on the total income of an assessee in an income year. The term "total income" has been defined in section 2(44) of the Income Tax Ordinance, 1979 and scope thereof is given in section 11 of the Ordinance. Under the normal provisions the assessment of the total income of an assessee starts with the filing of return of total income and a mechanism has been, provided for the collection of tax whereby tax is deducted at source under section 50 before the assessment and in respect of certain assessees provision has been made in section 53 for payment of advance tax and thereafter every person who is required under the Ordinance to furnish a return of total income is obliged to pay the remaining tax payable by him on the basis of such return on or before the date on which he is so required to furnish 'such return under section 54 of the Ordinance and all these advance deduction, collection and payment of taxes are subject to final assessment and are to be adjusted towards the final tax liability on the completion of assessment. However, under the presumptive tax regime by virtue of various deeming provisions the entire amount of certain payments/receipts or value of goods have been treated as income of a person and the tax charge thereon at the rates specified in the First Schedule have been treated as final discharge of the tax liability. Neither any further assessment is to be made nor any further tax is to be recovered or any amount is to be refunded. No expenses or deductions are to be allowed. No set off of any loss is to be given. However, there are various facts of the presumptive tax regime. For example, under section 80 dealing with the shipping business of non-residents section 80-A relating to air-transport business of non-residents and section 80-AA concerning the tax on income of non-residents from fee and technical services, a return is to be filed in the firm prescribed by the C.B.R. which are other than the form of return of total income required to be filed under section 55 of the Income Tax Ordinance and such assessees are not require to file return of total income under section 55. In the case of assessees to whom sections 80-B, 80-C and 80-CC are applicable no return in any form is required to be filed and in their case the decutions/collections are male under section 50 and the deductions/collections so made are deemed to be final discharge of the tax liability under the Ordinance. The persons whose income is chargeable under section 80-B, section 80-C or section 80-CC are merely required to file a statement under section 143-B of the Ordinance. There is yet another situation in which in the case of a company or registered firm returns are filed in the normal course, the assessments are also completed in the ordinary course. However, if no tax is payable or the tax payable is less than 1/2% of the amount representing its turnover from all sources the aggregate of the declared turnover is deemed to be income of the said company or registered firm and the tax thereon is charged 1/2% of the said turnover. Thus, we find that in first and third category of the presumptive tax regime returns are filed while in the second category no return is filed and a system for charging tax in this category has been evolved by blending the provision contained in section 50 of- the Income Tax Ordinance (which in its original form envisaged advance deduction, collection or payment of tax which is subject to adjustment of the final tax liability on completion of assessment) with the provisions introduced in sections 80-B, 80-C and 80-CC of the Income Tax Ordinance, 1979. For the time being we will not examine in detail the provisions contained in sections 80-B and 80-CC because in the present appeal we are seized of the provisions contained in section 80-C only. A perusal of subsection (2), subsection (3) and subsection (4) of section 80-C shows that references have been made to section 50 of the Income Tax Ordinance. A perusal of subsection (2) of section 80-C shows that under para. (1) of clause (a) it is provided that where a person is a resident the amount representing payments on Which tax is deductible under subsection (4) of section 50 and in para. (11) there of it is provided that the amount as computed for purpose of collection of tax under subsection (5) of section 50 in respect of goods imported shall be the amount referred in subsection (1) of section 80-C and it has been deemed to be income of the said person. It means that if tax is not deductible under subsection (4) of section 50. on the amount representing payments to a resident such amount shall not be deemed to be income of the said person for the purpose of section 80-C. Here a question arises as to when tax is deductible under any provision contained in section 50. The point has been considered by a Single Bench of this Tribunal in the judgment reported as 1996 PTD (Trib.) 1128 in which it has been held that the provisions contained in section 50 are not independent provisions as any, deal with the advance payment of tax in the shape of deductions and collections before the assessment and all such deductions or collections are subject to adjustment of taxes on income from various sources classified under section 15 of the Income Tax Ordinance. It has further been held in the said judgment that the provisions contained in section 50 are to be read with other provisions in the Income Tax Ordinance, 1979 creating charge and that the provisions contained in section 50 are not to be read in isolation as the deduction or collection under section 50 are to be adjusted from the final tax liability on completion of assessment. Thus, the ratio of the above judgment is that before making any deduction or collection under section 50 a final tax liability has to exist and if no final tax liability exists or if the final tax liability already stands discharged with the result that no lax liability under the Ordinance is either existing or can be created then no resort can be made to section 50 of the Income Tax Ordinance. The point in issue has been examined in another context by another Division Bench of this Tribunal in a recent judgment reported as 1997 PTD (Trib.) 301. In this case the assessee entered into a contract with a non-resident shipping company and on the amount of freight paid to the non- resident shipping company the assessee did not deduct tax at source under section. 50 with the result that the assessing officer disallowed the claim of freight under section 24(b) of the Income Tax Ordinance. In the said case the assessing officer had placed reliance on the provisions contained in section 50(3) for the purpose of deduction of tax at source and in default thereof the expenses were disallowed by resort to section 24(b) of the Income Tax Ordinance. It was held by the learned Division Bench that section 50(3) will become operative only if it has been established independently that the relevant payment of which it has to be applied is taxable in the hands of the recipients. It was ultimately held that the provisions of section 50(3) cannot be invoked in the absence of the main charge on the recipients.
24. As already observed the presumptive tax regime falling under the category II (sections 80-B, 80-C and 80-CC) is a mixture of the new provisions inserted in the Ordinance and the provisions contained in the original Ordinance in section 50. In all these sections- reference has been made to the deductions/collections under section 50 and as such it is imperative to examine whether the tax is deductible/collectible or not under section 50 before it can be held if the provision contained in section 80-C is applicable or not. It should not detain us long in holding that the tax is deductible/collectible from the income of an assessee which is liable to the charge of tax under the Ordinance either under normal law or under the presumptive tax regime. The income-tax is to be charged on the total income of an assessee as determined on completion of assessment or on the deemed income in certain cases under the normal assessment and under the presumptive tax regime, as well. However, in whatever manner the income is determined the condition precedent for levy of income-tax is that there should be income and until and unless specifically provided in the statute the income-tax cannot be levied twice on the income of an assessee in the same income year as the income-tax is an annual charge. If any deviation is to be made there has to be clear, unambiguous and independent provision for such charge. In the absence of any such provision the income-tax can be levied on the income of an assessee only once in an assessment year. We are fortified in our views that the condition precedent for deducting/collecting tax under section 50 of the Income Tax Ordinance is that the amount, receipt, profit or gain of the value of any goods or article is income or deemed income and the amount deducted or collected is to be on account of payment of tax on behalf of assessee, within the provisions contained in section 50(8)(b) and section 50(9)(b) of the Income Tax Ordinance which read as under:
50(8). Any sum deducted or collected, or purported to be deducted or collected, under this section shall be --
(a)................
(b) Treated as payment of tax on behalf of the assessee.
50(9)(b) Any sum from which tax is deductible under this section Shall be deemed to be income chargeable to tax under this Ordinance.
25. The above provisions are to be read with the provisions contained in section 80-C(l)(2), (3) and (4) of the Income Tax Ordinance. A perusal of the above provision shows that the expressions "income", "tax" and "assessee" are to be kept in view. If a person is not an assessee or the amount received, accrued or arisen to him is not income or deemed income or tax is not payable thereon no deduction or collection is to be made under section 50 of the Income Tax Ordinance. The expression "assessee" has been defined in section 2(6) of the Income Tax Ordinance as follows:
"2(6). 'Assessee' means a person by whom any tax or any other sum of money is payable under this Ordinance, and includes-
(a) every person in respect of whom any proceeding under this Ordinance has been taken for the assessment of this income or the income of any other person in respect of which he is assessable or of the amount of refund due to him or to such other person;
(b) Every person who is required to file a return of total income under section 55, section 72 or section 81; and
(c) Every person who is deemed to be an assessee, or an assessee in default, under any provision of this Ordinance. "
26. A perusal of the above definition shows that assessee is a person who is liable to pay any tax or any other sum of money under the Income Tax Ordinance and in respect of whom any proceeding under the Income Tax Ordinance has been taken for the assessment of his income or income of any other person in respect of which he is assessable. Thus, if income of a person `has already been assessed under any of the provisions of the Income Tax Ordinance and the tax or any other sum of money payable under the Income Tax Ordinance .has already been paid such person no more remains assessee for the purpose of creating any charge. We would like to clarify that the above observation is subject to the condition that the assessment once completed is liable to be reopened or revised or rectified or enhanced by recourse to the relevant provisions contained in the Ordinance but all these proceedings should have nexus to the original assessment proceedings or the income determined in the original assessment orders.
27. Now we revert to the contention of Mr. Rehan Hasan Naqvi that after payment of tax under section 50(5) of the Income Tax Ordinance read with section 80-C (1) and (2)(ii) the appellant discharged his final tax liability under the Ordinance and, therefore, no further tax could be levied on him on account of any receipt or payments to the appellant in respect of the same goods which suffered the incidence of tax at the import stage. perusal of subsection (4) of section 80-C shows that it is provided therein that where the assessee has no income other than the income referred to in subsection (1) in respect of which tax has been deducted or collected the tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under the Ordinance. We find substance in the contention of Mr. Naqvi, that the Legislature has intentionally used the expression "deducted or collected" and not "deducted and collected" for the obvious reason that the deduction and collection of advance tax under section 50 visualized two different situations and deal with two different set of circumstances. The deduction applies to the payments received by an assessee on supply of goods, contracts etc. while collection becomes relevant in case of imports only. In both the cases by virtue of deeming provisions the entire payments have been deemed as income and for the purpose of collection of tax the entire value of the imported goods has been treated as income. The intention of law is very clear that an assessee whose deemed income has either been subjected to deduction of tax or collection of tax, would be deemed to have discharged final tax liability under the Income Tax Ordinance. A perusal of the assessment order shows that the assessing officer has observed that the collection of tax under section 50(5) would be the final discharge of the tax liability relevant to imports only and the tenor of his order further shows that the subsequent supply of the same goods would entail further deduction of tax under section 50(4) of the Ordinance and that the final tax liability envisaged in subsection (4) of section 80-C would be after the tax is collected and deducted both. The learned C.I.T. (A) has subscribed to this view. We are of the opinion that this erroneous view has been taken firstly for the reason that the expression deducted and collected in subsection (4) of section 80-C has not been properly interpreted and has been taken as deducted and collected for which there is no sanction in law. We are of the considered opinion that under subsection (4) of section 80-C the discharge of final tax liability is in respect of an assessee vis-a-vis the deduction or collection of tax under section 50 and is not restricted to the import of goods only for the simple reason that mere import of goods is of no avail. Either it has to be used by an industrial undertaking as raw material for its own consumption which has been taken out of the purview of section 80-C or it has to be further sold or supplied and only then the transaction would be completed. Thus, when an assessee on import of commercial goods is made to pay tax under section 50(5) it would be deemed to be final discharge of his tax liability under the Income Tax Ordinance in respect of the said goods and not in respect of import only and, therefore, once advance tax is collected under section 50(5) the same assessee in respect of same goods would not remain assessee for the purpose of determination of his income or levy of tax because ii would amount to levy of double income -tax for which there is no clear and unambiguous sanction in law..
28. The contention of M: Rehan Hasan Naqvi is further supported with the provision contained in subsection (7) of section 80-C according to which in a case to which subsection (4) applies, an order under section 59-A shall be deemed to have been made in respect of income referred to in subsection (1). The C.B.R. has also considered the above provisions and vide Circular No.8 of 1991, dated June 30, 1991 has stated as follows for the guidance of the departmental officers:
(IV). The tax deducted or collected at source shall be deemed to be final discharge of tax liability in respect of all persons including companies and registered firms who have no other receipts or source of income.
(VI). Since a person having no other income shall not be required to file his `return of income nor any assessment in his case shall be made, a provision has been made whereby an order under section 59-A shall be deemed to have been made in respect of such deemed income without making a formal assessment. "
29. Here a question arises as to when and at what stage an assessment under section 59-A shall be deemed to have been made as provided in subsection (7) of section 80-C. It is clear that an assessee is not required to file any return of total income and no formal assessment is to be made. The only conclusion which can be drawn is that as soon as the tax is collected or deducted an assessment under section 59-A shall be deemed to have been made for on the reason that the discharge of final tax liability deemed under subsection (4) of section 80-C can be operative in this manner only. The rationale being that an assessee is said to have discharged his final tax liability when the total income of an assessee is assessed, the tax payable is determined and thereafter the tax payable is collected. Prior to the completion of this process the final tax liability of an assessee is not discharged. By now it is established principle of the interpretation of deeming provisions that the things are to be taken to their logical conclusions. There is another principle of the law of taxation that there should be no uncertainty either in the levy of tax or in the manner of assessment or collection thereof. If any other view is taken there would be state of uncertainty. For example, in a case of import of goods by two persons the tax would be collected irrespective of the subsequent manner of final disposal of goods, provided they are not to be used as raw-material for consumption of an industrial undertaking. "Thus, in case of both the persons with the collection of tax on the value of imported goods the provisions contained in subsections (1), (2), (4) and (7) of section 80-C shall come into play and by virtue of these provisions assessment under section 59-A shall be deemed to have been made in respect of both the persons. If subsequently, one of the persons sells those goods in the market to any person other than Government, local authority, company or registered firm the discharge of final tax liability shall become absolute and the deemed assessment under section 59-A shall be final and if the second person supplies the same goods then according to view of the departmental officers the assessment shall be reopened and the discharge of final tax liability shall not be deemed to be absolute and the vested right accrued in favour of an assessee shall be taken away for which no mechanism has been provided in the law. Thus, if the view of the departmental officers is accepted two different consequences shall follow in respect of two different assessees on the basis of future course of action adopted by them which would be discriminatory. Mr. Rehan Hasan Naqvi has rightly argued that there is no provision in the Income Tax Ordinance for giving two different and discriminatory treatments on the basis of subsequent course of action adopted by two persons for disposing of their imported goods. So long presumptive tax regime was not there the assessees were not confronted with this situation because in the case of sale as well as supplies the income and tax payable was determined on filing of return of the total income and completion of assessment, and tax deducted at source was to be adjusted towards the final tax liability. In the case of assessments under the ryprmal law there was no question of any discrimination in respect of the two persons placed under similar situations. Under the presumptive tax regime also no discriminatory treatment is to be inferred and no assessee is to be placed in less advantageous position or to be subjected to levy of double tax until and unless there is clear and unambiguous provision in law which is clearly lacking in the present case.
30. For the reasons stated above we are of the considered opinion that as soon as person has suffered the incidence of tax by way of collection under section 50(5) of the Income Tax Ordinance an assessment would be deemed to have been made in respect of income pertaining to the imported goods and by virtue of such collection the assessee shall be deemed to have discharged his final tax liability under the Income Tax Ordinance and no further deduction is to be made in respect of the same goods under subsection (4) of section 50 for the simple reason that no tax liability remains against such assessee and thus no tax is deductible under subsection (4) of section 50 with the result that section 80-C(2)(a)(i) is not applicable on such supplies.
31. Consequent to the above conclusions it is held that the learned two G officers below were not justified in holding that even after collection of tax under subsection (5) of section 50 the appellant have not discharged its final tax liability and that the supply of the spare imported goods were liable to deduction of tax under subsection (4) of section 50 under the presumptive tax regime by virtue of provisions contained in section 80-C. The orders of the learned two officers below are, therefore, vacated and the tax liability created at Rs.38,92,618 is hereby deleted.
32. So far the second issue is concerned Mr. Rehan Hasan Naqvi has placed reliance on the following judgments:
(i) M/s. Prince Glass Works and others v. C.B.R. 1995 PTD 856 (Kar H.C.)
(ii) M/s. Ittehad Chemicals Ltd: v. I.A.C. Income Tax, Range-5, Lahore. (1996) PCTLR 730 (Trib.)
33. Mr. Rehan Hasan-Naqvi has submitted that the judgment of Hon'ble Sindh High Court was produced before the C.I.T. (A) but he refused to follow the same for the reason that the Hon'ble High Court merely set aside the impugned orders for de novo proceedings in accordance with the parameters laid down in the judgment. Mr. Rehan Hasan Naqvi has contended that in all fairness the learned C.I.T. (A) ought to have given finding in accordance with the parameters laid down by the Hon'ble High Court. Before we embark on considering the ratio of the judgment of Hon'ble Sindh High Court it would be appropriate to reproduce section 13 of the Income Tax Ordinance, 1979 which reads as follows:---
"13. Unexplained investments, etc. deemed to be income.---(1) Where,--
(a) Any sum is found to be credited in the books of an assessee maintained for any income year; or(aa)? he assessee is found to have made any investment or if found to be the owner of any money are valuable article, in any year; or
(b) The assessee is found to have made any investment in any income year which is not recorded in the books of account maintained for that income year or is not shown in the wealth statement furnished under section 58 in respect of that year; or
(c) The assessee is found in respect of any income year to be the owner of any money or valuable article which is not recorded in the books of account, if any, maintained by him or is not shown by him in any wealth statement furnished under section 58 in respect of that year; or
(d) The assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Deputy Commissioner finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement furnished under section 58 in respect of that year;
(e) An assessee has, during any income year, incurred any expenditure, and the assessee offers no explanation about the nature and source of such sum, investment, acquisition of money or valuable article, excess amount or the money from which the expenditure was met, as the case may be, or the explanation offered by him is not, in the opinion of the Deputy Commissioner, satisfactory, the sum so credited, the value of the investment, the money or the value of the article, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax. under this Ordinance:
Provided that, where any act referred to in clauses (a) to (e) is discovered after the assessment of income of the income year to which the said act relates has been made, the income chargeable to tax under this section shall be included in-the total income of the income year relevant to the assessment year in which the said discovery is made:
Provided further that in cases referred to in clauses (aa) to (e) such income shall not be chargeable to tax unless approval of the Inspecting Additional Commissioner has been obtained.
(2) Where the value of any investment or article referred to in clauses (aa), (b), (c) or (d), or the amount of expenditure referred to in clause (e) of subsection (1) is, in the opinion of the Deputy Commissioner, too low, the Deputy Commissioner may determine, after giving a reasonable opportunity to the assessee of being heard a reasonable value of the amount thereof, as the case may be and all the provisions of subsection (1) shall have effect accordingly.
34. The relevant facts in the case of Prince Glass Works were that the assessee submitted its return for total income for the relevant assessment year in normal course. Statement under section 143-B was also filed in respect of the income falling under section 80-C. The assessing officer in purported pursuance of Circular No.12 issued by C.B.R. made addition under section 80-C(5) the petitioner assailed the addition before the Hon'ble High Court contending that subsection (5) of section 80-C is applicable only in case where nature or source of any sum, investment, money, valuable article, etc. as referred to in section 13 has been taken into account by the assessee. It was further contended that the assessee would be liable to payment of tax in respect of any unexplained excess only under the provisions contained in section 13 and, therefore, the provisions of subsection (5) of section 80-C cannot be invoked by assessing officer without first identifying the nature or source of such taxable amount. The Hon'ble High Court after examining various provisions contained in section 80-C observed as follows:
"The assessee shall not even be required to file the return of total income under section 55 of the Ordinance. Subsection (5) of section 80 must, therefore, be considered in such perspective. Reference to subsection (5) of section 80-C shows that it begins with the words 'while explaining the nature and source of any sum, investment, money or valuable article, excess amount or expenditure referred to in section 13.' Therefore, the provisions of the said subsection cannot be invoked without reference to the provisions of section 13 of the Ordinance. Section 13(1) of the Ordinance indicates that in case an assessee during any income year has credited any sum to his account or as investment in money or has acquired any valuable, article etc. and is unable to offer any explanation regarding its nature or source, such excess amount or expenditure shall be deemed to be the income of the assessee. Subsection (2) of section 13 further indicates that notwithstanding the offering of such explanation by an assessee regarding the nature or source of such expenditure etc. The same is found to be too low, all the provisions of subsection (1) of section 13 shall have effect. It has been contended on behalf of the respondents that in every case of difference of opinion between the assessing officer and an assessee regarding the taxability of any amount, section 13 would be attracted if such amount shown in the books of accounts remains unexplained. Be that as it may, reference to the provisions of section 80-C(5) and section 13 shows that in such excess credited in assessee's account, has referred to in clauses (a) to (e) of section 13(1) shall be deemed to be income of the assessee for the re Levant income year chargeable to tax. Further reference to the words, "takes into account any source of income which is subject to tax in accordance with the provisions of this section occurring in subsection (5) indicates that the provisions of said subsection cannot be invoked unless an assessee takes into account a source of income to which the provisions of section 80-C apply. The subsection further provides that under such circumstances the assessee shall not be entitled to take credit of any sum as in excess of an amount which if taxed at rate or rates other than rate applicable to income chargeable to tax under the said section would have resulted in tax liability equal to the tax payable in respect of income under the said section. It, therefore, clearly shows that only in case when an assessee while explaining the nature or source of an excess has referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of section 80-C the tax liability is to be determined in accordance with the provisions of section 80-C(5) of the Ordinance. There may be a case where an assessee while explaining such excess amount or expense etc. may take into account a source of income which is not subjected to tax in accordance with the provisions of section 80-C. In such a case the provisions of subsection (5) would not apply. Under such circumstances any such excess amount referred to in section 13 of the Ordinance can be assessed under the normal procedure provided by the Ordinance. It is, therefore, incumbent on the assessing officer to first identify the source of income before invoking the provisions of subsection (5) of the Ordinance. It is pertinent to point out that the only object behind incorporation of subsection (5) into section 80-C appears to be to give effect to the provisions of section 13 of the Ordinance which, otherwise is not possible without taking recourse to the provisions of subsection (5) Section 13 indicates that any unexplained excess shall be deemed to be the income of the assessee whereas according to the provisions of section 80-C tax from an assessee is to be charged at a rate specified in the First Schedule on the whole of amount referred to in subsection (2) of section 80-C. The words 'whole of such amount' referred to the gross receipts of an assessee which are not synonymous with 'income' referred to in section 13, therefore, an artificial method of determining the assessee's income under the normal procedure as laid down by the Ordinance has been provided by subsection (5) which would also include the unexplained excess referred to in section 13 of the Ordinance to determine the liability. of the assessee."
35. After explaining the law as above the Hon'ble High Court remanded the case to the assessing officer for determining the question afresh in accordance with the parameters as laid down by the Hon'ble High Court for the reason that sufficient facts were not available before the Hon'ble High Court for giving the straight finding. However, it does not mean that the departmental officers can ignore the law as laid down by the Hon'ble High Court on the pretext that the case was remanded to the assessing officer for determining the facts afresh.
36. In the second judgment on which reliance has been placed by Mr.Rehan Hasan Naqvi a Division Bench--of the Income Tax Appellate Tribunal, Lahore Bench has decided the issue in the light of law as laid down by Hon'ble High Court. The learned Members of the Division Bench held as follows:
"It may be pointed out that the declared sales and purchases for the period under appeal has been accepted. Neither any inflation in expenses nor suppression of any item of income had been suspected by the assessing officer. There was not even a hint of any unexplained investment. Section 13 had been invoked in round about manner. Instead of pressing it into service after specifying the unexplained investment or expenditure etc. which is prerequisite ordained by the statute, the assessing officer applied section 80-C(5) on the basis of notional figures. There can be to cavil to the contention that section 80-C(5) can be invoked only with reference to any unexplained investment of expenditure mentioned in section 13. Appellant's objection on this issue must, therefore, be upheld. The addition under section 80-C(5) read with section 13 is accordingly deleted."
37. We have carefully considered the ratio of above judgments and we are inclined to agree with the contention of Mr. Rehan Hasan Naqvi that the point in issue already stands decided in favour of assessee. We would like to add few Words only by way of clarification. The purpose of enacting subsection (5) of section 80-C has already been discussed by the Hon'ble High Court and it has been clearly observed that the only object behind incorporation of subsection (5) into section 80-C appears to give effect to the provisions of section 13 of the Ordinance which otherwise was not possible without taking recourse to the provisions of subsection (5). It has further been observed by the Hon'ble High Court that any excess amount referred to in section 13 of the Ordinance can be assessed under the not mean procedure provided by the Ordinance and it is, therefore, incumbent out the assessing officer to first identify the source of income before invoking the provisions of subsection (5) of the Ordinance. A perusal of subsection (5) of section 80-C and section 13 of the Income Tax Ordinance, 1979 in the light of observations made by the Hon'ble High Court clearly indicates that the law applied by the assessing officer is not in consonance with the spirit of law. This interpretation in effect takes away a benefit given by the law in very clear terms which provides that the entire amount representing payments on which tax is deductible under subsection (4) of section 50 other than payment on account of services rendered and the amount as computed for the purpose of collection of tax under subsection (5) of section 50 in respect of goods imported not being goods imported by an industrial undertaking as raw material for its own consumption, shall be treated to be deemed income of an assessee and the tax thereon shall be charged at the rate specified in First Schedule and in respect of such income when the tax has been deducted or collected the tax deducted or collected under section 50 shall be deemed to be the final discharge of the tax liability under the Income Tax Ordinance. It appears that the departmental officers have not properly understood and applied the instructions of C.B.R. contained in Circular No.12 of 1991, dated June 30, 1991 which reads as follows:---
"Imputing Income under subsection (5) of section 80-C through 'Working Back From Tax Paid.
Subsection (5) of section 80-C provides for the method of determining the amount of which an assessee (who has been deriving income which is subject to tax in accordance with the provisions of this section) can take credit of while explaining the nature and source of any sum, investment, money valuable article, excess amount or expenditure referred to in section 13. It has been laid down that in such a case, the income shall be taken to be that amount on which the tax works equal to the amount of tax paid under section 50(4) or 50(5) without investment allowance.
EXAMPLE IV
| Case of an individual. | Rupees |
| Payment received under section 50(4) on contracts | 20,00,000 |
| Deduction @ 3 % | 60,000 |
Under subsection (5), he would be allowed credit of an amount worked out as under:
At the income-tax rates applicable to an individual, a tax liability of Rs.60,000 will result in an income of Rs.3,08,571.
In this case the assessee would be allowed a credit of Rs.3,08,571. Any sum in excess of that would be treated as his unexplained investment in accordance with the relevant provisions of section 13.
EXAMPLE V
Case of Registered Firm
| Payments received by a registered firm | 20,00,000 |
| Presumptive tax paid | 60,000 |
| Income, which if tax at normal rates, would have resulted into a super-tax liability of Rs.60,000 | 3,60,000 |
This registered firm would be allowed a credit of Rs.3,60,000. Any sum in excess of that amount would be treated as its unexplained investment in accordance with the relevant provisions of section 13.
EXAMPLE VI
| Case of a Private Limited Company | Rupees |
| Contract payment received | 20,00,000 |
| Presumptive tax paid | 60,000 |
| Income, which if taxed at normal rates, would have resulted into a liability equal to the aforesaid amount of Rs.60,000 | 1,09,090 |
This company would be allowed a credit of Rs.1,09,090. Any sum in excess of that amount would be treated as its unexplained investment in accordance with the relevant provisions of section 13.
EXAMPLE VII
Case of multiple deduction:
| Imports | 60,00,000 |
| Deduction at source | 1,20,000 |
| Supplies | 20,00,000 |
| Deduction at source | 50,000 |
| Total deduction | 1,70,000 |
| Presuming it to be a case of individual income which if taxed at normal rates would have resulted into a tax liability equal to the aforesaid amount of Rs.1,70,000 | 3,22,857 |
Credit for the purpose of section 13 shall be available to this tax payer to the extent Rs.3,22,857."
38. A perusal of the above instructions shows that it related to imputing of income under subsection (5) of section 80-C through working back from tax paid. There is nothing in these instructions to say that any profit earned by an assessee and credited in the books of accounts in respect of income to which section 80-C is applicable, if found in excess of imputable income under subsection (5) of section 80-C shall automatically be deemed to be unexplained income of the assessee chargeable to tax. The instructions of C.B.R. are very clear, which are to the effect that subsection (5) of section 80-C provides for the method of determining the amount of which an assessee (who has been deriving income which is subject to tax) in accordance with the provisions of this section can take credit of "while explaining the nature and source of any sum, investment money, valuable article, excess amount or expenditure referred to in section 13 it has been laid down that in such a case, the income shall be taken to be that amount on which the tax works equal to the amount of tax paid under section 50(4) or 50(5) without investment allowance.
39. In these instructions the very expression used in subsection (5) of section 80-C has been imported and the departmental officers while interpreting subsection (5) of section 80-C and following the instructions of C.B.R. ignored the expression, "while explaining the nature and source of any sum, investment, money, valuable article, excess amount or expenditure referred to in section 13". The result is that they have fallen in error and in the present case where no question arose of explaining the nature and source of any sum, investment, money, valuable article, excess amount or expenditure referred to in section 13, the amount of profit credited in the books of accounts by the appellant in excess of imputable income under subsection (5) of section 80-C has been treated as deemed income under section 13(1)(aa). Although the assessing officer has observed at page 3 of the assessment order that, "clause (5) of section 80-C of the Ordinance clearly stipulates that while explaining the nature and source-of any sum, an assessee shall not be entitled to take credit of any sum of as is in excess of an amount which if taxed at a rate or rates other than the rate applicable to income chargeable to tax under this section would have resulted in tax liability equal to tax payable in respect of income under this section". However, while coming to the conclusion that the credit is admissible for the income which is attributable to tax deducted or collected under section 50(4) or 50(5) of the Ordinance and the balance income being in excess of such attributable income is to be taxed under provisions of section 13 of, the Ordinance, completely failed to consider that neither any notice was served by the assessing officer for submitting explanation about the nature and source of any sum, nor any occasion arose for submitting any explanation in this behalf. On the other hand, the voluntary explanation that the amount credited in the books at Rs.2,65,91,469 was on account of net profit declared by the appellant in his profit and loss account for the current year was not disputed. The result is that the credit entry in the books is in respect of an amount, which is fully explained.
40. The view taken by the departmental officers is so erroneous that in applying the same various provisions of law have been violated. The first violation has occurred when the assessing officer has failed to identify any unexplained sum, as held by the Hon'ble High Court in the case of Prince Glass Works cited earlier. The second error has taken place that as observed by the Hon'ble High Court in the case of Prince Glass Works the only object behind incorporation of subsection (5) into section 80-C is to give effect to the provisions of section 13 of the Ordinance which otherwise was not possible, while the departmental officers have applied the law in such a manner as if section 13 already existing in the Statute Book was to be used to curtail the provisions contained in subsection (4) of section 80-C according to which the deduction or collection of tax under section 50 was to be deemed as final discharge of tax liability. The third illegality, which has taken place is that according to subsection (5) of section 80-C while explaining the nature and source of any unexplained sum etc. the assessee would be entitled to take credit to the extent of imputable income under subsection (5) of section 80-C but assessee has not been called upon to explain nature and source of any unexplained sum etc. The fourth illegality/mistake which has taken place is that section 13 can be applied during the course of normal assessment only as it is an attribute of the normal assessment that the books of accounts and other evidences are examined, scrutiny is made, explanations are called upon, the explanations furnished are examined, evidence if necessary is recorded and all these powers can be exercised while making a normal assessment. It is abundantly clear that in the presumptive tax regime no such exercise can be undertaken and the exercise undertaken in this behalf by the assessing officer is violative of subsection (7) of section 80-C which clearly provides that in a case to which subsection (4) applies an order under section 59-A shall be deemed to have been made in respect of income referred to in subsection (1). Thus, in respect of income falling under the presumptive tax regime envisaged under section 80-C the assessment is made under section 59-A and not under section 62 with the result that no such exercise can be made under the law. The provisions contained in section 13 can be invoked during the' course of assessment under normal law on urnishing of return of total income under section 55 and during the course of proceedings under section 62 or in case of non-furnishing of return of total income if an assessee has been served to furnish such return when the assessment is made under section 63 and not in an assessment under section 59-A. It is clearly provided in subsection (4) of section 80-C that the assessee shall not be required to file return of total income under section 55 in respect of income referred to in subsection (1) of section 80-C. Thus, the assessing officer is neither empowered to call upon an assessee to file return of total income under section 55 in respect of profit earned in relation to the income referred to in subsection (1) of section 80-C nor any other tax liability can be created to such sum under the provisions of Income Tax Ordinance for the simple reason that to the extent of that income an assessee is deemed to be discharged of the final tax liability under the Ordinance and not merely under section 80-C.
41. The true intent and purport of enacting subsection (5) of section 80-C has been explained by the Hon'ble Sindh High Court in the case of Prince Glass Works Ltd. cited above which is as follows:
"It, therefore, clearly follows that only in case where an assessee while explaining the nature or source of an excess as referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of section 80-C the tax liability is to be determined in accordance with the provisions of section 80-C(5) of the Ordinance. There may be a case where an assessee while explaining such excess amount or expenditure etc. may take into account a source of income which is not subject to tax in accordance with the provisions of section 80-C. In such a case, the provisions of subsection (5) would not apply. Under such circumstances any such excess amount referred to in section 13 of the Ordinance can be assessed under the normal procedure provided by the Ordinance. It is, therefore, incumbent on that assessing officer to identify the source of income before invoking the provisions of subsection (5) of the Ordinance."
42. The above exposition of law by the Hon'ble High Court leaves no room for any doubt that the provisions contained in subsection (5) of section 80-C cannot be applied while considering the income referred to in subsection (1) of section 80-C. As already stated earlier in fact, the Assessing Officer has no jurisdiction at all to make either any assessment in respect of the income referred to in subsection (1) of section 80-C or any scrutiny for the simple reason that in respect of such income an assessment order under section 59-A shall be deemed to have been made if the tax is deducted or collected and the deduction or collection under section 50 is itself deemed to be final discharge of tax' liability of an assessee by the force of law. However, if in any assessment proceedings under normal law in respect of an income other than the income referred to in section 80-C and outside the presumptive tax regime to which section 80-C is applicable, an assessing officer finds any sum credited in the books of an assessee or any investment or money or valuable article or any expenditure and the assessee while explaining the nature and source of any sum, investment, money, valuable article, excess amount of expenditure takes into account any source of income which is subject to tax in accordance with the provisions of section 80-C, he shall not be entitled to take credit of any sum as in excess of an amount which if taxed at a rate or rates other than the rate applicable to income chargeable to tax under section 80-C, would have resulted in taxliability equal to the tax payable in respect of income under section 80-C.
43. Another important aspect of the view taken by the departmental officers is that although they have purported to make addition under section 13(I)(a) read with section 80-C(5) but totally ignored the fact that an addition under section 13(1)(a) can be made if an assessee offers no explanation about the nature and source of such sum, or the explanation offered by him is not, in the opinion of Deputy Commissioner, satisfactory. Thus, the condition precedent for deeming income under section 13 has been sought to be overruled under the cover of provisions contained in subsection (5) of section 80-C. It is pertinent to note that subsection (1) of section 80-C stain with the non obstante clause and likewise subsection (3) also starts with the non obstante clause, while subsection (5) of section 80-C does not start with the non obstante clause and it simply contains that, where an assessee while explaining the nature and source of any sum etc. referred to in section 13 takes into account any source of income which is subject to tax .i accordance with the provisions of section 80-C he shall not be entitled to take credit of any sum in excess of imputable income in accordance with the provisions contained in subsection (5) of section 80-C. Thus the provision contained in subsection (5) of section 80-C does not overrule or override any of the provisions contained in section 13 of the Income Tax Ordinance, 1979. In view of this we find substance in the contention of appellant that subsection (5) of section 80-C has been promulgated as a matter of concession to an assessee who wants to take benefit of presumptive income to cover up the unexplained sum etc. mentioned in section 13. It means that if during the normal assessment proceedings an Assessing Officer has identified any unexplained sum etc. and while explaining the said sum etc. an assessee takes into account a source of income which is not subjected to tax in accordance with the provisions of section 80-C, subsection (5) of section 80-C shall not apply. If an assessee takes into account a source of income which is subjected to tax in accordance with the provisions of section 80-C and he is able to explain the nature and source and is able to prove that the sum or investment etc. is the profit from the transaction, income whereof is governed under the presumptive tax regime under section 80-C, even then subsection (5) of section 80-C shall not apply for the simple reason that in such situation no addition can be made under section 13 because the source and nature of the sum, investment etc. is fully explained by an assessee and any sum, investment etc. the nature and source whereof is explained by an assessee cannot be deemed to be income of an assessee chargeable to tax under the Ordinance by recourse to section 13 of the Ordinance. However, if an assessee takes into account a source of income which is subjected to tax in accordance with the provisions of section 80-C and is not able to produce evidence to show that the sum, investment etc. forms part of profit earned from the transaction of business falling within the presumptive tax regime under section 80-C then the Legislature has extended a concession or benefit to such an assessee that he can take credit of a sum to the extent of imputable income under section 80-C(5). The rationale of this benefit is that under the provisions contained in section 80-C an assessee is not required to file any return of total income, no regular assessment is to be held, no allowances or deductions are to be allowed, no refund to tax deducted or collected or set off of any loss under any provisions of the Ordinance is to be allowed and the entire imports of commercial goods are to be treated as deemed income and tax is to be charged at the rate specified in the First Schedule and likewise in the case of supplies of goods or execution of a contract etc. with the Government, local authority, a company or a registered firm etc. the entire payment is to be treated as income and is subjected to tax. For these reasons an assessee may venture not to maintain an account and, therefore, if at any subsequent stage an assessee is not able to produce evidence of the profit earned on such income and he is called upon by a Assessing Officer to explain the nature and source of any sum, investment etc. he can get benefit to the extent of imputable income under subsection (5) of section 80-C without production of any evidence while explaining the nature and source of any sum, investment etc.
44. For the foregoing reasons we are of the considered opinion that the assessing officer has wrongly invoked the provisions contained in subsection (5) of section 80-C; in the facts and circumstances of this case without identifying any unexplained sum, investment etc. and making an assessment order on the basis of statement under section 143-B of the Ordinance, which is absolutely without jurisdiction. The addition made under section 80-C(5) read with section 13(1)(a) of the Income Tax Ordinance is, therefore, deleted.
45. Before parting with this order we would like to further observe that on perusal of record we have found that in the present case the appellant had declared loss at Rs.7,826 which pertained to property income. So far the business income is concerned a statement under section 143-B was filed. The assessing officer while making assessment order in respect of the property income accepted the declared loss but rightly ignored the same for the reason that the loss of rental income could not be adjusted against income under section 80-C. However, thereafter, he entered into an exercise of making a full-fledged assessment order under section 80-C without realizing that on the basis of statement under section 143-B which is in the nature of information only he could not proceed to make an assessment order. As already explained in respect of the deemed income under section 80-C as soon as a deduction or collection is made the assessment order is deemed to be made under section 59-A by virtue of the provisions contained in subsection (7) of section 80-C. Thus, when an assessment is already made under section 59-A with the collection of tax, no further assessment can be made under section 62 which has been done by the assessing officer. We would further like to observe that the assessing officer fell in serious error by treating the statement under section 143-B as the return of total income and making an assessment under section 62 in respect of the income under 0 section 80-C and thus the entire assessment order excluding, property income is without jurisdiction and on this score also both the additions made under section 80-C(2)(a)(i) read with section 50(4) and under section 13(1)(a) read with section 80-C(5) are without jurisdiction and liable to be struck off. We would further like to observe that in respect of income referred to in subsection (1) of section 80-C an assessee is not required to file any return of total income under section 55 and, therefore, no notice can be issued to an assessee for furnishing return of total income under section 56 and likewise no notice can be issued under section 65 for the simple reason that in the case of reopening of assessment under section 65 the requirements of notice, under section 56 become applicable and the assessment is completed under section 62 which cannot be done in respect of an income referred to in subsection (1) of section 80-C. The reason for our holding so is that in case of import of commercial goods there is no question of any concealment as the Collector of Customs is required to collect advance tax computed on the basis of value of such goods as increased by the customs duty and sales tax if any, levied thereon at the rates specified in the First Schedule. Likewise in the case of payment in full or m part including a payment by way of advance tax to any person resident on account of supply of goods or the execution of a contract with the Government or a local authority or a company or a registered firm or any foreign contractor or consultant or consortium where the total value in any financial year of goods supplied or contract executed exceeds fifty thousand rupees the payer is bound to take advance tax at the time of making such payment at the rate specified in the First Schedule and as such there is no question of any concealment. No allowance or deductions are to be allowed and likewise no refund of tax or set off of any loss is to be made and as such in respect of an income referred to in subsection (1) of section 80-C no occasion would arise to invoke the provisions contained in section 65 and thus normal provisions of assessment contained in the Ordinance shall not be attracted. The question may arise as to how the revenue is protected if the correct amount required to be deducted or collected has not been deducted or collected. The answer is contained in section 52 of the Income Tax Ordinance, 1979 which reeds as follows:
"52. Liability of persons failing to deduct or pay tax.---
-----Where any person fails to deduct or collect or having deducted or collected, as ' the case may be, fails to pay the tax as required by, or under section 50, he shall, without prejudice to any other liability which he may incur under this Ordinance, be deemed to be an assessee in default in respect of such tax."
46. A perusal of above section shows that in the case of any default by any person saddled with the responsibility of deducting or collecting the tax he shall be deemed to be an assessee in default in respect of such tax in addition to any other liability he may incur under this Ordinance. Thus, the Legislature has taken care of, and there is no possibility of loss of revenue in the case of default on the part of any person responsible for deducting or collecting the tax under section 50(4) and section 50(5) which is relevant for the purpose of income referred to in subsection (1) of section 80-C. Thus, if on perusal of statement under section 143-B, an assessing officer finds that any default has taken place, he can have recourse to the provisions contained in section 52 instead of embarking on calling upon an assessee to file a return of total income under section 56 or 65 or to venture in entering into exercise of making regular assessment under section 62 which is absolutely prohibited under section 80-C.
47. We have dilated on various aspects of the issue coming before us in detail in order to demonstrate that the presumptive tax regime has provided various protections to assessee as well in addition to protecting the State Revenue and to dispel the idea that the presumptive tax regime is always arbitrary or oppressive. In fact, the presumptive tax regime appears to be arbitrary or oppressive because of the misinterpretation of various provisions and wrong applications thereof by the Department. The presumptive tax regime in fact has on the one hand introduced various deeming provisions and on the other hand has curtailed various discretions of the departmental officers, which, in the final analysis, has created an equilibrium provided the different provisions are applied correctly and in harmony to each other.
48. Consequent to above findings the appeal is allowed as above.
M.B.A./329/Trib. Appeal allowed.