I T.AS. NOS. 1532/KB AND 1533/KB OF 1996-97 VS I T.AS. NOS. 1532/KB AND 1533/KB OF 1996-97
1997 P T D (Trib.) 2209
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqi, Chairman and Nazeer Ahmad Saleemi, Accountant Member
I.T.As. Nos. 1532/KB and 1533/KB of 1996-97, decided on 10/07/1997.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 138, 62 & 65---Revision by Commissioner---Re-opening of assessment---Decision in revision by Member (Judicial), Income Tax (C.B.R.) on the issue of the re-opening of assessment having attained finality could not be re-agitated in subsequent proceedings.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65 & 66---Re-opening of assessment---Limitation---Order upholding the re-opening of assessment was passed- in revision by Member (Judicial), Income Tax (C. B. R.) on 10-11-1993---Assessment, thus, could be completed by 30-6-1995--- Assessment completed on 28-6-1995 was not barred by limitation.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.13(1)(b)---C.B.R. Circular No.I.T.-Jud-1(162)/90, dated 19-11-1990-- Addition--- Discovery of difference between stock as declared and as pledged with Bank by assessee---Procedure as given in C.B.R. Circular No.IT-Jud-1(162)/90, dated 19-11-1990 to be followed .by Assessing Officer---Statements of Bank Authorities were recorded while making additions by Assessing Officer---Stock in question being not insured nobody from any insurance company was required to be examined---Assessing Officer had fully complied with the directions contained in C.B.R. Circular.
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1)(b)---Qanun-e-Shahadat (10 of 1984), Preamble & Art.133-- Addition---Difference between stock declared with the Income-tax Department and pledged with the Bank by assessee---Addition---Statements of Bank Authorities recorded while making addition by the Assessing Officer---Denial of right of cross-examination of Bank Authorities to the assessee---Effect---Held, addition in such a case could be made if there was quantitative difference---If there was no quantitative difference and there was difference in the valuation of stock only, meaning thereby that there was no quantitative difference but there was difference in valuation of the stock declared with the department and pledged with Bank, only then until and unless there were any other strong reasons, no addition was to be made in that behalf---Income-tax Appellate Tribunal and all other Income-tax Authorities exercise quasi-judicial powers and jurisdiction, provisions of Qanun-e-Shahadat, 1984, thus, were applicable to the income-tax assessment proceedings---Appellate Tribunal, in circumstances, set aside the addition made in the assessment under S.13 of the Income Tax Ordinance, 1979 on account of difference between stock declared with Income Tax Department and allegedly pledged with the Bank with directions to the Assessing Office' to recall the witnesses whose cross-examination had been denied to the assessee and passed fresh order on point of addition after affording opportunity of cross-examination to the assessee to all the witnesses on whose evidence valuation was sought to be placed.
Amin-ud-Din Ansari for Appellant.
Ali Nasir Bokhari, D.R. for Respondent.
Date of hearing: 7th May, 1997.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQI (CHAIRMN).---The above appeals are directed against the order, dated 28-12-1996 by the learned C.I.T.(A), Zone-I, Karachi in I.T.A. No.939 and 940 relating, to the assessment years 1989-90 and 1990-91.
2. The objections raised in the assessment year 1989-90 art that the assessment order having been merged in the order of Income-tax appellate Tribunal cannot be reopened under section 65 of the Income Tax Ordinance, 1979 and hence assessment is alleged and without jurisdiction. Tk second objection is that the assessment order passed under section 62/65 read with section 138 of the Income Tax Ordinance is barred by time the third objection is that the addition made under section 13(1)(b) of the Income Tax Ordinance, 1979 is illegal, without lawful authority and without lubrication. The objections raised in the appeal relating to the assessment year 1990-91 are that the assessment is barred by time and the addition made under section 13(1)(aa) is illegal, without lawful authority and without jurisdiction.
3. Heard Mr. Aminuddin Ansari, learned counsel for the appellant registered firm dealing in iron and steel products by import and agency from Steel Mills and also earning income from custom bounded warehouse and Mr. Ali Nasir Bokhari, learned representative for the department. The first objection raised in the assessment year 1989-90 that the order of Income-tax Officer merged in the order of Tribunal and, therefore, the assessment could not be reopened under section 65 cannot be allowed to be raised for the reasons that finding on this issue has attained finality and, therefor cannot 1be allowed to be agitated again. The brief facts in this regard are rat on receiving information from the United Bank Limited, Site Branch, Karachi that the appellant has concealed stock quantitatively, the assessing officer reopened the assessment under section 65 and completed the asessment under section 62/65 on 31-5-1993. During the course of assessment proceedings objection was raised that the original assessment order under section 62 was assailed in first appeal and subsequently in second appeal before the Income Tax Appellate Tribunal and, therefore, the as assessment order stood merged in the order of Tribunal and consequently it could not be reopened. The objection was overruled. The appellant filed first appeal before the learned CIT(A), Zone-III, Karachi and the objection was taken in appeal also and vide order dated 29-8-1993 the objection was repelled. The appellant thereafter, instead of filing second appeal before the Tribunal preferred revision before the Member (Judicial) Income-tax, C.B.R. repeating the objection which was again repelled and the reopening of assessment under section 65 was upheld. The assessment was, however, set aside with the direction to follow the procedure laid down in C B.R. Circular No.IT-Jud-1(162)/90 dated 19-11-1990. The assessment order which is the subject-matter of appeal before us arises out of the assessment order under section 65/62/138. Thus, after the decision in revision by the learned Member (Judicial) Income Tax, the issue` relating to the reopening of assessment has attained finality and cannot be allowed to be reagitated in the subsequent proceedings. The objection relating to the reopening, of assessment in the assessment year 1989-90 is, therefore, misconceived and is not allowed to be raised.
4. The second objection in both the appeals is on the point of limitation. During the course of arguments Mr. Aminuddin Ansari has conceded to the facts that the order by learned Member (Judicial) Income tax, C.B.R. was made on 10-11-1993 and by virtue of provision contained in section 66 the assessment may be made at any time within two years from the end of the financial year in which such order is received by the DCIT. Thus, the assessment could be completed by 30-6-1996 while assessment has been completed on 28-6-1995. Thus, the assessments have been completed within the period of limitation. This objection is also without substance and is hereby repelled.
5. The third common objection raised by Mr. Aminuddin Ansari is the additions made in the two assessment years under appeal on account of additions in the stock declared to the assessing officer through the production of stock register and the stock declared to the bank for the purpose of hypothecation for obtaining loans. The first objection in this behalf is that the learned Member (Judicial) Income-tax, C.B.R. while setting aside the addition had directed to follow the procedure as already laid down in the C.B.R. circular dated 19-11-1990 and the direction have not been complied with, therefore, the additions of not sustainable. Mr. Aminuddin Ansari has submitted in this behalf that the C.B.R. circular cited above contains that on discovering the difference between stock (as declared. versus as pledged) addition of the said difference should be made after verification from the Insurance Companies as normally the hypothecated or pledged stock is invariably insured. It is further stated that in the circular that the bank authorities also verify the quantity of such stock. The C.B.R. directed that the department should insure that the statement of bank authority as well as of the Insurance surveyors are duly recorded while making such additions The learned D.R. has vehemently rebutted the contention contending that-the assessing officer fully complied with the direction in this behalf as bank authorities were examined which is evident from the perusal of assessment order. The assessing officer examined the statement of Syed Asadullah Shah, Vice-President, United Bank Limited, Site Branch, Karachi and Mr. Anwar Raja and Shamshad Alam from Habib Credit and Exchange Bank Limited, C Karachi. So far the examination of some persons from Insurance Company is concerned, the bank authorities stated that the stock was not insured and, therefore, the question of examining any person from Insurance Company did not arise. On perusal of record we are persuaded to agree with the submission of learned D.R. and the objection raised by the learned representative for the appellant is hereby repelled. The second objection in this behalf is that the appellant has been condemned without affording sufficient opportunity, inasmuch as the right of cross-examination was denied. Mr- Aminuddin Ansari has submitted that vide letter dated 3-5-1995 the DCIT was requested to allow the cross-examination of the bank manager, United Bank Limited, Site Branch, Karachi. Again vide letter dated 6-6-1995 discrepancies were pointed out in the statement of witnesses. Again vide letter dated 15-6-1995 request was made that opportunity to cross-examine. Mr. Syed Asadullah Shah, V.P., United Bank Limited and M/s. Anwar Raja and Shamshad Alain of Habib Exchange Bank Limited may be allowed. The contents of their statement were specifically disowned and challenged. However, the right of cross-examination was denied. Mr. Aminuddin Ansari has specifically referred to the letter dated 6-6-1995 by the DCIT in reply to the learned counsel's letter dated 3-6-1995 which contains that, "you have requested on behalf of your client M/s. Yousuf Hardware Ltd., to cross examine the bank Manager, Site Karachi. This is to inform you that Bank Manager has been cross-examined by me. By doing this I have complied to the instructions given by the Member (Judicial). It is not necessary to examine the banker in your presence. The contents of the statement of the Bank Manager have already been confronted to you vide notice under section 13 of the Income Tax Ordinance, 1979." Mr. Aminuddin Ansari has produced certified copy of the record to show that the cross-examination of two witnesses namely Mr. Sami Masood, Bank Officer Grade-I UBL, Site Branch, Karachi and Mr. Shamshad Alam, Officer credit advances, Habib Credit Exchange Bank Limited was allowed. However, these witnesses were not conversant fully with the case and, therefore, other witnesses were examined who are M/s. Syed Asadullah Shah, V.P., U.B.L., Site Branch, Karachi and Anwar Raza and their cross-examination was denied. Mr. Aminuddin Ansari has submitted that the assessments proceeding were conducted initially by Mr. Chaman Lai, DCIT who allowed cross examination. When the assessment proceedings were transferred to learned DCIT Mrs. Nausheen Saeed she denied the right of cross-examination and made additions by placing reliance on the evidence of such witnesses, which is not justified in law. He has submitted that with the promulgation of Qanoon-e-Shahadat Order, 1984 the provision contained in Qanoon-e-Shahadat Order, 1984 is applicable to the Income-tax proceeding also and the point in issue already stands, decided by the Honourable Lahore High Court in the case of Mrs. Rani v. Commissioner of Wealth Tax, Lahore 1993 PTD 206, wherein it has been held as follows:
"Although Evidence Act, 1872 was applicable to judicial proceedings 'in or before any Court, but the Qanoon-e-Shahadat Order, 1984 has been made applicable to all judicial proceedings before any Court, a Tribunal or any other Authority exercising judicial or quasi judicial powers or jurisdiction except an Arbitrator' The scope of applicability of Qanoon-e-Shahadat Order, 1984 is thus much larger than that of Evidence Act, 1872. It cannot be doubted that the proceedings before the Income-tax Authorities are judicial in nature and further that they are exercising quasi-judicial, if not judicial powers. "
6. Mr. Aminuddin Ansari has submitted that under the provisions contained in Qanoon-e-Shahadat Order, 1984 no evidence can be relied upon until and unless right of cross-examination is afforded to the other party. He has submitted that in the present case the right of cross-examination has admittedly been denied and, therefore, in the wake of denial of right of cross examination the additions by placing reliance on such witnesses is not sustainable. He has submitted that the objection was specifically raised before the learned CIT(A) who did not entertain the objection by placing reliance on the judgment of Honourable Supreme Court of Pakistan in the case of CIT, Rawalpindi v Moala Bux reported as PLD 1990 SC 990 = 1990 PTD 821. The learned CIT(A) has observed that the Honourable Supreme Court of Pakistan upheld the addition to income on account of difference in values of stock as declared to Bank vis-a-vis what were recorded in the books and the treatment was not vitiated because all the requirements of Qanoon-e-Shahadat Order, 1984- as is being argued before me had not been met although the judgment was pronounced well after the promulgation of Qanoon-e-Shahadat Order, 1984." The learned CIT(A) has placed reliance on the judgment of Dacca High Court reported as PLD .1968 Dacca 591 and a judgment of Indian Jurisdiction reported as (1964) 9 Tax 258. The learned CIT(A) further observed that" throughout history of Income Tax Ordinance since 1922 there has been almost complete judicial consensus in the whole area (South Asia) to the effect that the Evidence Act, 1872 does not apply to proceeding under Income-tax". He further observed that", the case-law pertaining to application of provisions of Qanoon-e -Shahadat Order, 1984 to Income-tax Assessment proceedings is not as yet fully developed". He has again referred to the judgment of Supreme Court of Pakistan in the case of Moala Bux cited above and has held that", the judgment was pronounced much after promulgation of Qanoon-e-Shahadat Order, 1984 and additions made was upheld although all the requirements of Qanoon-e-Shahadat Order, 1984 particularly relating to cross-examination of Bank Manager were not made. The learned CIT(A) further observed that, "it is too much to assert ' impliedly' that the learned judges of Supreme Court (and lawyers at the bar in that case) were not aware of the relevant provisions of Qanoon-e-Shahadat Order, 1984 when deciding the case of Moala Bux referred to above in 1990". We are persuaded to agree with the contentions of Mr. Aminuddin Ansari that all the observations made by the learned CIT(A) are the result of non -appreciation of correct facts and the law applicable to Haji Moala Bux case. Mr. Aminuddin Ansari has pointed out that Haji Moala Bux case pertained to the assessment year 1967-68 and, therefore, there was no question of applying provisions contained in the Qanoon-e-Shahadat Order, 1984, notwithstanding pronouncement of judgment by the Honourable Supreme Court of Pakistan on 13-6-1990. We fully agree with the submissions of Mr. Aminuddin Ansari that all the observations, made by the learned CIT(A) in relation to Haji Moala Bux case are misconceived, mis-considered and irrelevant. The provisions contained in Qanoon-e-Shahadat Order, 1984 can never be made applicable to the assessment relating to the assessment year 1967-68. We are further persuaded to agree with the contention of Mr. Aminuddin Ansari that the learned CIT(A) is not justified in observing that the case law pertaining to application of provision of the Qanoon-e-Shahadat Order, 1984 to Income tax Assessment proceeding is not as yet fully developed. It is specifically provided in Article 1(2) of the Qanoon-e-Shahadat Order, 1984 that, "it extends to the whole of Pakistan and applies to all judicial proceedings in or before any Court, including a Court martial, a tribunal or other authority exercising judicial or quasi judicial powers or jurisdiction, but 'does Am apply to proceedings before an arbitrator." By now it stands established that the Income-tax Authorities and the Income-tax Appellate Tribunal exercise quasi-judicial powers and jurisdiction. After judgment of the Honourable Lahore High Court cited earlier, no discussion is required on this point and for the time being the judgment of Hon'ble Lahore High Court has the binding effect on the Income-tax Appellate Tribunal and all other Income-tax Authorities exercising jurisdiction under the Income Tax Ordinance, 1979. Thus it does not lie with any Income-tax Authority to say that the provisions contained in Qanoon-e-Shahadat Order, 1984, are not applicable to the Income-tax assessment proceedings.
7. For the foregoing reasons it is held that the assessing officer has misdirected in denying the right of cross-examination to the appellant and the learned CIT(A) fell in error in upholding such treatment. We, therefore, set aside the additions made in the two assessment years under appeal under section 13 of the Income Tax Ordinance, 1979 on account of difference between stock declared with the Income-tax Department and. allegedly pledged with the Bank. The assessing officer is directed to recall the witnesses whose cross-examination has been denied to the appellant. The assessing officer should pass a fresh order on the point of addition under section 13 after affording opportunity of cross-examination to the appellant of all the witnesses on whose evidence reliance is sought to be placed. We further direct that in view of the judgment of Honourable Supreme Court of Pakistan in the case of Moala Bux Corp the addition can be made under section 13 on account of difference in the stock declared with the DCIT and pledged with the Bank if there is quantitative difference. However, if there is no quantitative difference and there is difference in the valuation of stock only meaning thereby that there is no quantitative difference but there is difference in valuation of the stock declared with the DCIT and pledged with the Bank only then until and unless there are any other strong reasons, no addition should be made in this behalf.
8. Both the appeals are allowed as above.
M.B.A./393/Trib Appeal allowed.