ABBASS SHROFF VS MISS FARZANA
1998 P T D 2884
[Karachi High Court]
Before Rasheed Ahmed Razvi, J
ABBASS SHROFF and another
versus
Miss FARZANA and 4 others
Suit No. 1118 of 1990, decided on 02/04/1998.
(a) Income Tax Ordinance (XXX1 of 1979)---
-----Ss.65 & 162---Specilic Relief Act (I of 1877), S.42---Suit for declaration seeking annulment of assessment order passed by Income-tax Authority-- Maintainability---Essentials---In order to maintain suit challenging any order pasted under Income Tax Ordinance, 1979 plaintiff must show presence of three elements i.e. mala fides, illegality and absence of jurisdiction to pass such order, otherwise suit would be barred in terms of 5.162, Income Tax Ordinance, 1979---Plaintiff having failed to show presence of such elements, his suit seeking annulment of assessment order passed by Income Tax Authority would not be maintainable---Income Tax Authority in terms of S.65, Income Tax Ordinance, 1979 would be competent to conduct additional assessment for any order where, inter alia, any income eligible to tax had escaped assessment or where total income of assessee had been under assessed or assessed under too low a rate or had been subject of excessive relief or refund under the Income Tax Ordinance, 1979---Plaintiff, thus, could not challenge such assessment order in absence of plea of mala fides, illegality or absence of jurisdiction.
National Bank of Pakistan Karachi v. Feroze Malik and another PLD 1977 Kar. 258; P.B. Shah & Company v. Chief Executive Officer and others AIR 1962 Cal. 283; Mst. Chandni v. Rajhastan State and others AIR 1962 Raj. 36; Utility Stores Corporation of Pakistan Ltd. v. Punjab Labour Appellate Tribunal and others PLD 1987 SC 447; Hamid Husain v. Government of West Pakistan and others 1974 SCMR 356; Haji Abdullah Khan and others v. Nisar Muhammad Khan and others PLD 1965 SC 690; Trustees of the Port of Karachi v. Gujranwala Steel Industries and another 1990 CLC 197; Zaheer Ahmad and 6 others v. Allah Ditta and 16 others PLD 1983 Lah. 256; Noor Muhammad Punjab Government 1984 CLC 478; Mian Jamal Shah.. The Member, Election Commission, Government of Pakistan, Lahore and 2 others PLD 1966 SC 1; Khuda Bakhsh v. Khushi Muhammad and 3 others PLD 1976 SC 208; Khan Iftikhar Hussain Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd., Lahore PLD 1959 SC 258; Messrs Standard Hotels (Pvt.) Ltd. v. Messrs Rio Centre and others 1994 CLC 2413; Board of Control for Cricket in Pakistan v. Karachi Development Authority and 51 others 1997 CLC 795; Income-tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108; A1 Ahram Builders (Pvt.) Ltd. v. Income-tax Appellate Tribunal 1992 PTD 1671; Muhammad Rashid Bhatti v. K.D.A. and another PLD 1986 Kar. 130; The Commissioner of Income-tax, Karachi and 2 others v. Messrs N.V. Philip's Gloeilampenfabriaken PLD 1993 SC 434; Regional Commissioner of Income-tax, Corporation Region, Karachi and 2 others v. Shafi Muhammad Baloch 1998 SCMR 376; Saibesh Chandra Sarkar v. Bejoy Chand Matatoh AIR 1922 Cal. 4; F. J. De Verteuil v. Cantonment Committee, Karachi 37 IC 267; Raleigh Investment Co. Ltd. v. The Governor-General-in-Council PLD 1947 PC 19 = AIR 1947 PC 78; Ravi Paint Colour & Varnish Works Ltd. v. Federation of Pakistan PLD 1954 Lah. 551; Commissioner of Income-tax,, Punjab v. Tribune Trust PLD 1947 SC 247 = AIR 1948 PC 102; Janda Rubber Works v. Income-tax Officer 1950 ITR 951; Messrs Dinshaw & Company v. Income-tax Officer, Lucknow AIR 1941 Oudh 260; Nigana Silk Mills Ltd., Lyallpur v. Income-tax Officer, Lyallpur PLD 1963 SC 322; Punjab Province v. Federation of Pakistan PLD 1956 FC 72 and Pindi-Kashmir Transport Limited v. Commissioner of Income-tax, Lahore PLD 1954 Lah. 551 = PLR 1955 Lah. 1 ref.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.65 & 162---Specific Relief Act (I of 1877), S.42-Civil Procedure Code (V of 1908), O. VI, R.17---Suit for declaration seeking annulment of assessment order passed by Income Tax Authority---Such suit filed against Income Tax Officer was not maintainable in terms of 5.162, Income Tax Ordinance, 1979---Plaintiff was also not entitled to invoke jurisdiction against Income Tax Authorities without adopting process as provided under Income Tax Ordinance, 1979---Plaintiff's suit was, thus, dismissed against Income Tax Officer in respect of prayer seeking annulment of assessment order in question---Plaintiff, however, would have option to file amended plaint against private defendants.
Abdul Rauf for Plaintiff.
Raja Qasit Nawaz for Defendants Nos. l to 4.
Nasrullah Awan for Defendant No.5
ORDER
This is a suit for declaration and mandatory injunction filed by a private limited company against another private limited company namely M/s. Rukunddin (Pvt.) Ltd. and is three Directors in respect of an immovable property bearing Plot No.29, S$-5, Saddar Bazar, Karachi.
2. On 17-12-1997, when this case was fixed for evidence, it was pointed out by Mr. Nasrullah Awan that he has raised preliminary objections to the maintainability of suit and if the same are decided in affirmative, there will be no need to record evidence. Accordingly, it was ordered by consent that these two issues framed on 19-9-1992 be heard first. Following are the two legal issues:--
(i) Whether the suit is barred under section 162 of the Income Tax Ordinance, 1979? and
(ii)Whether the plaintiffs exhausted the remedies provided under the Income Tax Ordinance, 1979 before coming to the Court?
3. It has been rightly stated by Mr. Abdul Rauf that since no evidence has been recorded so far in the suit, the contents of the plaint are to be looked into and no other extraneous material. The admitted facts of the case are that defendants No.l to 3 were Directors of defendant No.4; that vide agreement dated 20-4-1985, that suit property was purchased by plaintiff No.2 namely M/s. Cosmo Builders (Pvt.) Ltd. on certain terms and conditions which are incorporated in para 4 of the plaint. One of the stipulation in the contract was that the sellers (now defendants No.l to 4) have cleared all the liabilities including duties and taxes in respect of the suit property till the assessment year 1985-86.
4. It is further case of the plaintiff that after paying the total consideration, he acquired the physical possession of the suit property and launched a project known as "Sasi Towers", that the income-tax returns prior to the assessment year 1985 were filed and accepted by the Income Tax Department; that defendant No.5 namely Income Tax Officer, Circular C-7 (Companies-I) having office at Income Tax Building, Shahrae-Kamal Ata Turk, Karachi vide letter dated 13-2-1988 proposed to re-evaluate the suit property as during the assessment year 1982 the suit property was not correctly valued; that the plaintiff made several representations before the Income Tax Authorities but no attention was paid; that on 31-8-1988, the case was reopened and the suit property was re-assessed, which ac; of the defendant No.5/I.T.O. has been impugned in this suit with the following relief:---
(a)Declaration that the defendants Nos. l to 4 are bound to comply with the terms and conditions of Agreement and Indemnity Bond dated 20-4-1985 and to satisfy all claims including tax liability of whatsoever nature alongwith Interest and Penalty, if any, no liability should be attached to the Plaintiffs/Buyers.
(b)The order of assessment dated 31-8-1988 is mala fide, illegal, null and void and of no legal consequence. The defendant No.5 has no jurisdiction to pass the above order and the same is not binding on the plaintiffs.
(c)Mandatory injunction directing the defendants Nos. l to 4 to fulfil their obligations and to appear before the Income Tax Officer defendant No.5 in response to his notice and to fulfil their obligations in terms of agreement and Indemnity Bond dated 20-4-1985.
(d)............................
(e)............................"
5. I have heard Mr. Abdul Rauf, Advocate for plaintiff and M/s. Raja Qasit Nawaz and Nasrullah Awan, Advocates for defendants. In order to appreciate the arguments of all the learned counsel, it is necessary to refer to section 162 of the Income Tax Ordinance, 1979 which reads as follows:---
"162. Bar of suits in Civil Courts. ---No suit shall be brought in any Civil Court against any order made under this Ordinance, and no prosecution, suit or other proceeding shall lie against any person for anything in good faith done or intended to be done under this Ordinance."
6. It is submitted by Mr. Abdul Rauf, learned counsel for the plaintiff that since the assessment order dated 31-8-1988 passed by defendant No.5/I.T.O. is illegal and without jurisdiction, it could not be termed to be an order passed under Income Tax Ordinance, 1979 (hereinafter referred to as the Ordinance, 1979). He has further argued that a plaint is not liable to be rejected in part as there are other grievances of the plaintiffs and reliefs, which they are seeking against defendants Nos. l and 4 who are not the Income Tax Authorities. He has placed reliance on the case. National Bank of Pakistan, Karachi v. Feroz Malik and another (PLD 1977 Karachi 258) where a learned Single Judge of this Court, Zafar Hussain Mirza, J. (as his Lordship then was) while following the rule laid down in the cases P.B. Shah & Company v. Chief Executive Officer and others (AIR 1962 Calcutta 283), Mst. Chandni v Rajhastan State and others (AIR 1962 Raj. 36) and an unreported case of this Court M/s. Khyber Insurance Co. Ltd. v. First National Citi Bank and others (Suit No.302/74) held that a plaint can be rejected as a whole and cannot be rejected in piecemeal. Mr. Abdul Rauf has further relied upon the following cases:
(i)Utility Stores Corporation of Pakistan Limited v. Punjab LabourAppellate Tribunal and others (PLD 1987 SC 447);
(ii)Hamid Hussain v. Government of West Pakistan and others (1974 SCMR 356);
(iii) Haji Abdullah Khan and others v. Nasir Muhammad Khan and others (PLD 1965 SC 690);
(iv)Trustees of the Port of Karachi v. Gujranwala Steel Industries and another (1990 CLC 197);
(v)Zaheer Ahmad and 6 others v. Allah Dita and 16 others PLD 1983 Lah. 256.
(vi)Noor Muhammad v. Punjab Government 1984 CLC 478;
(vii) Mian Jamal Shah v. The Member Election Commission, Government of Pakistan, Lahore and 2 others (PLD 1966 SC 1);
(viii) Khuda Bakhsh v. Khushi Muhammad and 3 others (PLD 1976 SC 208).
7. In the case of Hamid Hussain (supra), the question before the Hon'ble Supreme Court was, as to what is the limit of jurisdiction of the Civil Court to determine the validity of transfer of land under the Displaced Persons (Land Settlement) Act, 1958. One of the issue involved in that suit was whether the suit property has been converted into Sikni and if so, what is its effect? It was held by the Hon'ble Supreme Court that the Paka structure over the area in dispute was being used for purpose other than 'sub servient to agriculture' and, therefore, the suit property was not available at any time as land available for allotment and settlement in satisfaction of claim for rural land under the Act XLVII of 1958 or any rehabilitation scheme. In such circumstances, suit filed by the plaintiff was held to be maintainable with the observation, "It is a well-established principle that even where the jurisdiction of the Civil Court is barred and conferred upon Special Tribunal, Civil Courts, being Courts of alternate jurisdiction will have the jurisdiction to examine the acts of such forums to see whether their acts are in accordance with law or are illegal of even mala fide". The rule laid down in the case of Hamid Hussain was followed by Lahore High Court in the case of Zaheer Ahmad and 6 others and Noor Muhammad (supra). In the case of Utility Stores Corporation (supra) it was observed by Dr. Nasim Hasan Shah J. (as his Lordship then was) that the Tribunal which is invested with the jurisdiction to decide a particular matter, has the jurisdiction to decide it rightly and when the Tribunal acts wrong in law it acts outside the jurisdiction conferred on it. In Haji Abdullah Khan and others (supra) it was held by a Full Bench of Hon'ble Supreme Court that it is the duty of the Court itself to apply the law and that party is not bound to engage a counsel. The case of Gujranwala Steel Industries (supra) deals with a suit filed by the Karachi Port Trust in respect of certain fees and taxes. Mr. Abdul Rauf has referred to the observation of Justice Wajihuddin Ahmed (now Chief Justice of this Court) at page 201, that---
"where a statute creates new rights and also provides a Special Tribunal for their enforcement, then recourse to Civil Court may, impliedly, be barred. ' It was further observed that this bar will not operate in such a case where the Special Tribunal in its very nature is a form of summary remedy. Mr. Abdul Rauf has also referred to the observation of Hon'ble Supreme Court in the case of Mian Jamal Shah (supra) at page 49 that when an Administrative Officer acts illegally, he acts without jurisdiction and that an Administrative Officer has authority to pass order or to take action if certain facts exist and if these essential facts do not exist, his order or action is void. Lastly, Mr. Abdul Rauf has also referred to the case of Khuda Bukhsh (supra) where the dispute involved was in respect of transfer of immovable property in furtherance of Displaced Persons (Possession and Rehabilitation) Act, 1958. It was held by the Hon'ble Supreme Court that the order passed by the Chief Settlement Commissioner was, therefore, a nullity and could be ignored and that such order does not require to be set aside in any appeal or any other proceedings. "
8.It was contended by Mr. Nasrullah Awan that the suit is also hit by the provisions of Order XXIX, C.P.C. as the plaintiffs being a limited company no resolution was filed authorizing the plaintiff No.l to file and prosecute the instant suit. It was further argued that a complete remedy which is judicial in nature, is provided under the Ordinance, 1979 which was partly invoked by the plaintiff and after dismissal of his appeal, he immediately rushed to this Court. He has also filed a photo copy of order of appeal dated 13-12-1993 which shows that the appeal filed against the order of defendant No.5 was dismissed on the ,ground that it is time-barred. After that no appeal was filed before the Income Tax Appellate Tribunal as provided under section 134. He has vehemently argued that the suit is barred by virtue of section 162 of the Ordinance, 1979. He has placed reliance on the following cases:
(1) Khan Iftikhar Hussain Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd., Lahore (PLD 1959 SC 258);
(ii) M/s. Standard Hotels (Private) Ltd. v. M/s. RIO Centre and others (1994 CLC 2413);
(iii)Board of Control for Cricket in Pakistan v. Karachi Development Authority and 51 others (1997 CLC 795);
(iv) Income-tax Officer and others v. M/s. Chappal Builders (1993 SCMR 1108);
(v) Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal (1992 PTD 1671);
(vi) Muhammad Rashid Bhatti v. K.D.A. and another (PLD 1986 Karachi 130);
(vii) The Commissioner of Income-tax, Karachi and 2 others v. Messrs N. V. Philip's Gloeilampen Abriaken (PLD 1993 SC 434): and
(viii) Regional Commissioner of Income-tax, Corporation Region, Karachi and 2 others v. Shafi Muhammad Baloch (1998 SCMR 376).
9. In so far as objections of Mr. Awan on the point of lack of resolution of the company is concerned, I am not inclined to consider the same at this stage as this does not form part of the two preliminary issues framed by this Court and if it is considered, it will amount to taking the plaintiff by surprise. However, it would be open to him to raise this plea at any subsequent stage. The cases of Al-Ahram Builders N.V Phillip's and Chappal Builders arise out of a Constitutional petition filed before the High Courts. In the case of Al-Ahram Builders, the petitions invoked the jurisdiction of the forums constituted under the Ordinance, 1979 but after dismissal of his appeal by the Commissioner Income Tax, instead of filing appeal before the Appellate Tribunal it preferred a Constitutional petition under Article 199 of the Constitution, 1973. Such tendency was deprecated by the Supreme Court by observing that the tendency to bypass the remedy provided under the relevant statutes and to press into service Constitutional jurisdiction of the High Courts is to be discouraged. Such practice is justification and/or mala fide. The appeal filed by M/s. AI-Ahram Builders before the Supreme Court against dismissal of Constitutional petition was dismissed with the following observation:
"In the present case, the appellant had succeeded before the Appellate Commissioner, but upon filing of appeal, the Tribunal set aside the appellate order and remanded the case to the I.T.O. for framing assessment. Against the above order, the proper course would have been to file a reference under section 136 of the Ordinance as observed above. Apparently, there was no compelling and justifiable reason, which could have prompted the appellant to file above Constitutional petition."
10. The same view was reiterated by the Hon'ble Supreme Court in the case of N.V. Phillip's (PLD 1993 SC 434). In the case of Chappal Builders (surpa), the Act of I.T.O. by reopening an assessment order under section 65 of the Ordinance, 1979 was under challenge in respect of self-assessment scheme. It was observed that the practice of the High Court in tax matters to interfere with the orders of the forums established under the-Ordinance, 1979 is not correct when the normal course is being adopted by the petitioner. The rule laid down in the case of Muhammad Rasheed Bhatti and Shafi Muhammad Baloch (supra) are not relevant for the disposal of these issues.
11. The question whether a Civil Court has jurisdiction in the matter involving assessment made by an Income Tax Authority came up for consideration before a Division Bench of erstwhile Sindh Chief Court in Dayaram Ramdas v. Secretary of State (AIR 1925 Sindh 130) in the First Appeal filed against the judgment and decree of the District Judge, Sukkur. The Income Tax Act VII of 1918 was repealed by the Act XI of 1922 but the provision of section 52 of the repealed Act was saved and was incorporated in section 67 of the Income-tax Act, 1922. It was this section 52 of the Income Tax Act, 1918 which was considered by a Division Bench where after making reference to the cases Saibesh Chandra Sarkar v. Bejoy Chand Matatoh (AIR 1922 Calcutta 4) and F.J. DE Verteuil v. Cantonment Committee, Karachi (37 I.C. 267), it was held, inter alia, that a Civil Court has no jurisdiction to interfere with or to question the proprietary of an order which has been pissed by a duly constituted Tribunal and which the Legislature has declared to be final; and that the Income Tax Act creates a special jurisdiction and provides a special remedy. Consequently, a suit filed by the plaintiff/appellant for a declaration that his assessment of income-tax be declared illegal was held to be barred with the following observation:
"If the Collector of Income-tax, who has been constituted a special Tribunal by the Income-tax Act, had assessed anything but income or had levied an assessment on the classes of income exempted by the Act, he would have over-stepped the limits of his jurisdiction, his assessment would not have been under the Act. But in this case he professes to tax income and income only; there may be an error in his calculation, but his order is still one under the Act,. and, if erroneous, it is capable of rectification on appeal. The Collector was exercising a jurisdiction vested in him under the Act and his assessment, under the circumstances shown above, was one under the Act."
12. Again, in the case of Raleigh Investment Co. Ltd. v. The Governor General-in-Council (PLD 1947 PC 19 = AIR 1947 Privy Council 78) the provisions of section 67 of Income-tax Act, 1922 came up for interpretation where it was held by their Lordships of Privy Council that the jurisdiction of Civil Court to question assessment otherwise than by use of the machinery expressly provided by the Income-tax Act, 1922 appears to be inconsistent with the statutory obligations. The ratio laid down in the case of Raleigh Investment Company (supra) by the Privy Council was considered by a Full Bench of Lahore High Court in the case of Ravi Paint Colour & Varnish Works Ltd. v Federation of Pakistan (PLD 1954 Lahore 551). In reference to section 67 of the Income-tax Act, 1922 it was held that no doubt this section bars only suits, but in principle there is no difference in a case in which the matter is taken before the Civil Court by a regular unit and the one in which it is brought before that Court by. a miscellaneous petition. Reference was also made to the case of Commissioner of Income Tax, Punjab v. Tribune Trust (AIR 1948 P.C. 102), Janda Rubber Works v. Income Tax Officer (1950 ITR 951) and M/s. Dinshaw & Company v. Income Tax Officer, Lucknow (AIR 1941 Oudh 260) whereafter the following view was laid down:
"In short the (Indian) Income-tax Act is a complete code by itself, and it is abundantly clear that it was the intention of the Legislature that all questions of law and fact arising out of the proceedings under the Act should be decided by the authorities set up and in accordance with the procedure prescribed by the Act. It is evident that the only method open to an assessee to get a redress of his grievances is to set in motion the machinery provided by the Act. That the assessee should have a right to seek his remedy in the alternative in a Civil Court, is a notion inconsistent with the elaborateness and completeness of the machinery provided by the Act. If the Civil Courts start entertaining petitions against assessments made under the Act, the machinery set up by the Act would become useless. In some cases there may be a clash between the decisions of the Civil Courts and the Income-tax Authorities and thus, the collection of income-tax would become an extremely difficult matter. It would lead to anomalous results and no system of law would tolerate such a state of affairs. Again if the cases relating to income-tax are not decided in accordance with the Income Tax Act, it would become practically a dead letter ....
...It is thus perfectly clear that in matters relating to the assessment of income-tax the machinery that can be brought into action is the one provided by the Income Tax Act, which is a complete code by itself. Hence the jurisdiction of the Civil Courts is impliedly barred. Section 67 of the Income Tax Act expressly bars the institution of a suit in any Civil Court to set aside or modify an assessment made under the Income Tax Act."
13. The impact of section 67 of the Act 1922 which is parameter to section 162 of the Income Tax Ordinance, 1979 was considered by the Hon'ble Supreme Court of Pakistan in the case Nagina Silk Mills Ltd. Lyallpur v. Income Tax Officer, Lyallpur (PLD 1963 SC 322). The said case arises out of a Constitutional petition where it was held that the principle laid down by the Privy Council in the case of Raleigh Investment Company (supra) is a representative one and would not apply in the matter of writs. In that case, the appellant had approached the erstwhile High Court of West Pakistan seeking writs of certiorari against the Income Tax Authorities restraining them from passing any assessment order on the ground that much time has lapsed. The writ petition was dismissed by the High Court against which petitioner went into appeal before the Supreme Court where an objection was raised that the same was barred in view of section 67 of the Act 1922. Reliance was placed on the case of Releigh Investment Company (supra) as well as on the case of the Punjab Province v. Federation of Pakistan (PLD 1956 FC 72). It is pertinent to note that in the case of Punjab Province (ibid) it was held that where Income Tax Officers' order of assessment was without jurisdiction the bar contained in section 67 will not come into play. In the instant case, plaintiff was not able to show as to how the order of reopening of the assessment was unauthorised and without jurisdiction. No provision of law was cited to show that the order dated 31-8-1988 passed by defendant No.5, namely, Income Tax Officer was mala fide, illegal or in any manner without jurisdiction. In the absence of these elements from the case of plaintiff, I am of the considered view that a suit seeking setting aside or annulment of an assessment order passed by Income Tax Authority will not be maintainable. In order to maintain a suit challenging any order passed under the Income Tax Ordinance, 1979, it is incumbent upon the plaintiff to show presence of these three elements i.e. mala fide, illegality and absence of jurisdiction to pass such order, otherwise provisions of section 162 of the Ordinance, 1979 will come into play. In support of this proposition, I may quote here the view of the former Chief Justice of Pakistan Muhammad Munir, J. (as his Lordship then was) in the case The Punjab Province (supra) which was also the view of the Full Bench:
"In the discussion relating to this Court's jurisdiction, we should be taken to have negatived the contention that by reason of section 67 of the Income-tax Act or section 9 of the Code of Civil Procedure no suit of the present kind lies. The necessary conditions of section 204 of the Government of India Act being satisfied the suit is plainly competent. There is a real distinction between those cases where a suit was held to be incompetent as, for instance, Raleigh Investment Company Limited v. The Governor-General-in-Council (AIR 1947 PC 78 = PLD 1947 PC 19); Commissioner of Income tax, West Punjab v. Tribune Trust (AIR 1948 PC 102 -= PLD 1947 PC 247); and Pindi, Kashmir Transport Limited v. Commissioner of Income-tax, Lahore (1955 PLR Lah. 1 = PLD 1954 Lahore 551) where the question was whether an assessment had been made according to law, the Income-tax Officer having jurisdiction on the subject-matter and over the assessee, and the present case where the question raised is that the Income-tax Officer had no jurisdiction at all to proceed against the Provincial Government. Here there is a complete absence of jurisdiction and if the Income Tax Officer had no authority to tax the Provincial Government, his proceedings are void, and the assessment order is not an answer to the suit on the ground that under the Income Tax Act that order is final. The present proceedings cannot at all be held to be 'under this Act' within the meaning of section 67 of the income-tax Act and, therefore, a suit even in a Civil Court will not have been barred. For the same reasons, section 9 of the Civil Procedure Code does not bar the suit...
14. A close scrutiny of the plaint indicates that although the question of legality and jurisdiction has been raised to passing of assessment orders dated 31-8-1988 by the defendant No.5/I.T.O. but there is no specific instances of any mala fides or the question of jurisdiction. Under section 65 of Ordinance, 1979 Income Tax Authority is competent to conduct additional assessment for any order for the reason, inter alia, where any income eligible to tax has escaped assessment or where total income of an assessee has been under assessed or assessed under too low a rate or has been the subject of excessive relief or refund under the Ordinance, 1979. Although it was vehemently contended by Mr. Abdul Rauf that Income Tax Authorities are not entitled to reopen a case after lapse of five years, there is no mention in this section whereby the powers of Income Tax Department are limited in respect of additional assessment as provided under section 65 of the Ordinance, 1979. The only embargo is that there must be definite information, which must come from the officer of the rank of Deputy Commissioner who must have obtained prior approval of the Inspecting Additional Commissioner. Annexure ' H' filed with the plaint indicates that the case was reopened on 28-2-1988 under the approval of Inspecting Assistant Commissioner under his order. It also shows that proper opportunity of hearing was afforded to the plaintiff and after such procedure the following order was passed:
"As already recorded in the foregoing, the purchase price of the Plot No. SB-5, Saddar Bazar, Karachi at Rs.49,75,000 is grossly understated. Assessee's contention, justifying the purchase price have been recorded in their explanation dated 25-8-1988 accompanied by the various documents whereby it has been sought to explain that the purchase price (illegible) in 1982 was reasonable, are (illegible). However, after discussion with the representatives of the assessee they have agreed that assessee's total income for the year under assessment i.e. 1982-83, we determine at Rs.12,50,000 vide order sheet entry dated 27-8-1988 signed by Mr. Jane Alam, assessee's authorised representative and Mr. Abas Sharoff, Director of the assessee-company. Accordingly, assessee's income for the year under assessment is determined at Rs.12,50,000 and assessment Is made as under:
| Total income as originally assessed Rs. | Nil |
| Addition on account of valuation of plot as discussed in the foregoing | Rs.12,50,000 |
| | Rs.12,50,000 |
| Taxes thereon: | |
| Income-tax @ 30% on Rs.12,50,000 | Rs.3,75,000 |
| Super-tax @ 25% on Rs.12,50,000 | Rs.3,12,500 |
| | Rs.687500 |
Mr. Nasrullah Awan has supported the above order by referring to section 65 of the Ordinance, 1979 which permits Deputy Commissioner, Income Tax Department to conduct additional assessment for any year and for the reason inter alia, where any income chargeable has escaped assessment; or where the total income of an assessee has been under assessed at too low a rate or has been the subject of excessive relief or refund. Such proceeding is to be initiated ' or after obtaining prior approval of the Inspecting/Additional Commissioner of Income Tax in writing
15. The facts of the case clearly reflect that the suit is not maintainable so far as defendant No.5 is concerned in connection with the prayer clause (b) which is directly hit by the provisions of section 162 of the Ordinance, 1979. But it is not the end of the matter. As rightly stated by Mr. Abdul Rauf, the plaint could not be rejected in part; this Court is left with no option but to answer the above two issues in the following manners
(i) That the suit is barred in respect prayer clause (b) and against the defendant No.5 namely Income Tax Officer.
(ii) That the plaintiff was not entitled to invoke jurisdiction against Income Tax Authorities without adopting the process as provided under the Income Tax Ordinance, 1979.
16. As a result of the above discussion, the suit is partly dismissed against the defendant No.5 namely Income Tax Officer in respect of prayer clause (b). The plaintiff is permitted to file amended plaint by omitting the name of defendant No. 5 and the relief sought against him within a period of four weeks.
A.A./A-213/K Order accordingly.