MUHAMMAD NAEEM VS THE DEPUTY COMMISSIONER OF INCOME TAX & WEALTH TAX
1999 P T D 1053
[Lahore High Court]
Before Najam-ul-Hassan Kazmi, J
MUHAMMAD NAEEM
Versus
THE DEPUTY COMMISSIONER OF INCOME TAX & WEALTH TAX, CIRCLE 10, COMPANY ZONE, -FAISALABAD and 3 others
Writ Petitions Nos.6285 to 6309 of 1998, decided on 30/10/1998.
(a) Wealth Tax Act (XV of 1963)---
----S.17---Wealth escaping assessment---Re-opening of assessment ---Pre conditions---Definite information---Connotation.
Under section 17 of Wealth Tax Act, 1963, reopening of the case is permissible, if by the reason of omission or failure on the part of assessee to make a return of his net wealth under section 14 or to disclose fully or truly all material facts necessary for the assessment, the net wealth chargeable to tax had escaped assessment for that year whether by reason of under assessment or assessment at too low a rate or otherwise. Clause (b) of section 17(1) of the Act provides that if the Wealth Tax Officer, in consequence of any information in his possession, has reason to believe that notwithstanding the fact that there was no omission or failure as referred to in clause (a), the net wealth chargeable to tax had escaped assessment for any year, whether by the reason of under assessment or assessment at too low a rate or otherwise he can serve the assessee with a notice and proceed in the matter in accordance with law. Proviso to subsection (1) of section 17 contemplates that no proceedings under this subsection shall be initiated unless definite information has come into the possession of Wealth Tax Officer or he has obtained the previous approval of the Inspecting Assistant Commissioner of Wealth Tax in writing to do so.
The pre-conditions for initiating proceedings under section 17 of the Act are that there should be definite information s in the possession of Wealth Tax Officer and the other prerequisites contemplated by subsection (1)(a) or (b) or (c) of section 17 shall exist. The words "definite information" are the keywords for the purposes of justifying under section 17. Obviously, every information cannot be treated as the basis for reopening of assessment but the information should be of the nature, which should qualify the requirement of "definite information". Where the assessee discloses all the material facts without any concealment and the assessment has been made consciously by the Assessing Officer, then, in the absence of discovery of new facts, which can be treated as "definite information", there cannot be any scope for re opening of the assessment. Any change of opinion on the basis of same material by the Assessing Officer, cannot warrant pressing into service the provisions under which the assessment can be reopened. The definite information should be factual information, which should make it lawful for the Assessing Officer to reopen any assessment already made. Once all the facts are fully disclosed by the assessee and considered by the Authorities consciously while completing the assessment, then, in the absence of new facts, covered by the requirement of "definite information", interference in the past concluded transaction cannot be made on account of any change in opinion of the Assessing Authority and any action, taken in the absence of satisfaction of mandatory requirement of law, will be untenable.
(b) Wealth Tax Act (XV of 1963)---
----S.17---Constitution of Pakistan (1973), Art. 199---Reopening of assessment---Constitutional petition---Maintainability---Record showed that department was willing to consider the point of jurisdiction and other objections of the assessee/petitioner before initiating proceedings under S.17, Wealth Tax Act, 1963---Question raised by assessee (petitioner) in the Constitutional petition,, had not so far been dealt with or commented upon by the department in a proper regular hearing on assumption of jurisdiction under S.17, Wealth Tax Act, 1963---Effect---Held, assessees (petitioners) would be well-advised if they raised the pleas sought to be advanced before High Court, in the departmental forum in the first instance and also to pursue the normal channels of appeal/revision/reference to the higher departmental forums moreso when the assessee had previously challenged the decision on notice under S.35, Wealth Tax Act, 1963 before the Commissioner of Appeals and remained successful in those proceedings to get the notice under S.35, dropped---Once having resorted to the departmental remedy, the assessee could not at his option take up another issue directly in the Constitutional jurisdiction of High Court---Principles.
Shagufta Begum v. The Income-tax Officer PLD 1989 SC 360 ref.
(c) Constitution of Pakistan (1973)---
----Art.199---Constitutional petition---Maintainability---Petitioner, once having resorted to the departmental remedy, could not at his option take up another issue directly by a Constitutional petition---Principles.
Shagufta Begum v. The Income-tax Officer PLD 1989 SC 360 ref.
Ch. Muhammad Ishaque for Petitioner.
Shafqat Mahmood Chauhan for Respondents.
Date of hearing: 4th September, 1998.
JUDGMENT
This judgment will decide Writ Petition No.6285 of 1998., Writ Petition No.6286 of 1998, Writ Petition No.6287 of 1998, Writ Petition No.6288 of 1998, Writ Petition No.6289 of 1998, Writ Petition No.6290 of 1998, Writ Petition No.6291 of 1998, Writ Petition No.6292 of 1998, Writ Petition No..6293 of 1998, Writ Petition No.6294 of 1998, Writ Petition No.6295 of 1998, Writ Petition No.6296 of 1998, Writ Petition No.6297 of 1998, Writ Petition No.6298 of 1998, Writ Petition No.6299 of 1998, Writ Petition No.6300 of 1998, Writ Petition No.6301 of 1998, Writ Petition No.6302 of 1998, Writ Petition No.6303 of 1998, Writ Petition No.6304 of 1998, Writ Petition No.6305 of 1998, Writ Petition No.6306 of 1998, Writ Petition No.6307 of 1998, Writ Petition No.6308 of 1998 and Writ Petition No.6309 of 1998 as the same arise out of common facts and raise common question of law.
2. Petitioners in all these petitions, are assessees, in respect of Wealth Tax. After four years from the assessment order, notice under section 35 of the Wealth Tax Act, 1963, for rectification of mistakes were served upon the petitioners who contested the same. Respondent No. l rejected the pleas raised by petitioners vide order, dated 17-9-1997.
3. Being aggrieved by the order of respondent No. 1, petitioners filed appeals before Commissioner Wealth Tax, Faisalabad. The appeals were accepted on 19-11-1997 and it was observed that the rectification order under section 35 of the Act, after the expiry of four years was ab initio void, which was accordingly set aside. The decision of the appellate authority was not challenged by way of appeal before the Income Tax Appellate Tribunal in terms of section 24 of the Wealth Tax Act, 1963 and thus, according to petitioners, the order attained finality. Respondent No. l again served the petitioners with notice, dated 13-3-1998 purportedly under section 17 of the Wealth Tax Act, 1963 on the ground that the net wealth chargeable to wealth tax under the Act was not assessed. The validity of these notices has been called in question in the present Constitutional Petitions.
4. In reply, the respondents have taken the stand that the petitions are premature, these are not maintainable as factual controversy has been raised, the remedies under the statute have not been availed and that the respondents have not taken any final action as only show-cause notices were issued to the petitioners.
5. Learned counsel for the petitioners argued that the notices, dated 13-3-1998 were illegal, without lawful authority, the assessment was completed by the adjudicating officer with conscious application of mind, no fresh definite informations were claimed to have been acquired, and the case could not be reopened under section 17 of the Wealth Tax Act, 1963 on the plea of "under assessment" or "change of opinion". It was added that the petitioners filed Return, no concealment of Wealth was made and, therefore, there was no justification for reopening the case. Lastly it was contended that after the expiry of limitation prescribed for reopening of the case under section 17 of the Act, respondent No. 1 could not issue notices for initiating proceedings to reopen the case, particularly, when the attempt to rectify assessment order could not succeed under section 35 of the Wealth Tax Act. '
6. Learned counsel for the respondents argued, that the petitions were not competent as the petitioners could appear before the Adjudicating Officer, give reply to the show-cause notices and explain that the action under section 17 would not be warranted and that the decision will be taken after hearing the petitioners. Learned counsel submitted that the petitioners would have the remedy of challenging the order in the hierarchy of jurisdiction and without exhausting those remedies, the present petitions could not be maintained. It was added that there are -factual controversies, which cannot be investigated in summary jurisdiction as evidence would be required for decision thereof. It was also maintained that limitation was eight years for clauses (a) and (b) of section 17 which provision was amended by Finance Act of 1995, dated 30,6-1995 whereby it was reduced to five years and since the amendment was not retrospective in operation, the action of respondents could not be assailed on this, account.
7. Under section 17 of Wealth Tax Act, 1963, reopening of the case is permissible, if by the reason of omission or failure on the part of assessee to make a Return of his net wealth under section 14 or to disclose fully or truly all material facts necessary for the assessment, the net wealth chargeable to tax had escaped assessment for that year whether by the reason of under assessment or assessment at too low a rate or otherwise. Clause (b) of section 17(1) of the Act provides that if the Wealth Tax Officer, in consequence of any information in his possession has reason to believe that notwithstanding the fact that there was no omission or failure as referred to in clause (a), the net wealth chargeable to tax had escaped assessment for any year, where, by the reason of under assessment or assessment at too low a rate or otherwise, he can serve the assessee with a notice and proceed in the matter in accordance with law. Proviso to subsection (1) of section 17 contemplates that no proceedings under this subsection shall be initiated unless definite informations have come into the possession of Wealth Tax Officer or he has obtained the previous approval of the Inspecting Assistant Commissioner of Wealth Tax in writing to do so.
8. While interpreting the true import and scope of section 65 of the Income Tax Ordinance, 1997 and section 17 of the Wealth Tax Act, 1963, it has been repeatedly' observed that the pre-conditions for initiating proceedings under section 17 of the Act are that there should be definite informations in the possession of Wealth Tax Officer and the other prerequisites contemplated by subsection (a) or (b) or (c) of section 17 shall exist. The words "definite information" are the key words for the purposes of justifying action under section 17. Obviously, every information cannot be treated as the basis for reopening of assessment but the information should be, of the nature, which should qualify the requirement of "definite information". Where the assessee discloses all the material facts without any concealment and the assessment has been made consciously by the Assessing Officer then in the absence of discovery of new facts, which can be treated, as "definite information"', there cannot be any scope for reopening of the assessment. Any change of opinion on the basis of same material by the Assessing Officer cannot warrant pressing into service the provisions under which the assessment can be opened. The definite information should be factual information, which should make it lawful for the Assessing Officer to reopen any assessment already made. Once all the facts are fully disclosed by the assessee and considered, by the authorities consciously while completing the assessment, then in the absence of new facts, covered by the requirement of "definite information", interference in the past concluded transaction cannot be made on account of any change in opinion of the Assessing Authority and any action, taken in the absence of satisfaction of mandatory requirement of law, will be untenable.
9. In these cases, the admitted facts are that assessments were completed by the Assessing Authority. After four years, notice under section 35 of the Wealth Tax Act, 1963 for rectification of mistakes were issued which were contested. Respondent No.l declined to accept the plea raised by the petitioners, vide order, dated 17-9-1997 but in appeal the order was set aside by the Commissioner vide order, dated 19-11-1997 and Department was not allowed to interfere in the guise of rectification proceedings. Subsequently, the present notices under section 17 of Wealth Tax Act, 1963 have been issued. The petitioners', precise claim is that the respondents cannot reopen the assessment in the garb of proceedings under section 17 of the Act, particularly when the order was not allowed to be interfered with under section 35 of the Act. Another grievance of the petitioners is that Rule 8(2)(c)(i) of Wealth Tax Rules, 1963 was declared to be ultra vires and of no legal effect in consequence of the judgment delivered by a learned Single Judge in Writ Petition No. 12975 of 1997, and therefore, under the plea of "under-assessment" on assumption of alleged less valuation of the shares would not possibly sustain. Another grievance is that the respondents could not reopen the matter after the expiry of limitation period provided by section 17 of Wealth Tax Act, 1963. The respondents have raised certain factual controversies and have maintained that certain concealment -of facts were made by the petitioners and that the notice was issued on account of the disclosure of definite informations. It is also the objection of the respondents that the petitions are premature, as the department has not finally initiated proceedings under section 17 of the Act and if the explanation to the show-cause notice is found to be satisfactory, the notice can be withdrawn.
10. From the facts noted supra it is discernible that the respondents are willing to consider the point of jurisdiction and other objections of the petitioners before initiating proceedings under section 17 of the Act. The question raised in these petitions have not so far been dealt with or commented upon by the Officer concerned in a proper regular hearing on assumption' of jurisdiction under section 17 of Wealth Tax Act. The petitioner, will be well-advised if they raise the pleas sought to be advanced before this Court in the Departmental forum in the first instance and also to pursue the normal channels of appeal/revision/reference to the higher departmental forum, moreso when the petitioner had previously challenged the decision on notice under section 35 before the Commissioner of Appeal and remained successful in those proceedings and in result thereof, the notice under section 35 of the Act was declared to be invalid and proceedings were dropped. Once having resorted to the departmental remedy, the petitioners cannot at their option take up another issue directly in the Constitutional jurisdiction and the appropriate course for them would be to contest the notice before the officer concerned and if not satisfied to challenge the order in the hierarchy of jurisdiction. If the petitioners have any apprehension that they would not get -any independent decision, it is made clear that officer concerned while adjudicating upon the matter will act bonafidely and will decide the issue in accordance with law and on its own merits being un influenced by any extraneous consideration. There is no bar in the way of petitioners to challenge the jurisdiction of Wealth Tax Officer and also to raise all legal objections against the maintainability of the notice or initiation of proceedings under section 17 of the Act, which if raised will of course be attended to and decided in accordance with law by respondent No. 1. It may be observed that the objections raised by the petitioners to the jurisdiction of respondent No. l and also against the maintainability of the notice or the very issuance of the notice, need consideration of respondent No. l who is bound under the law to decide the same, before assuming jurisdiction or taking any further action. In absence of finding against the petitioners, the respondent No. l cannot possibly further proceed in the matter. Since some factual controversies need to be resolved which cannot be done in the Constitutional jurisdiction, therefore, it will be more appropriate that these questions be decided by respondent No. 1. Of course, while dealing with reply to the show-cause notice the respondent No. 1 will consider all the legal objections to his jurisdiction and will render a decision independently and without being influenced by any other consideration.
11. In Shagufta Begum v. The Income Tax Officer PLD 1989 SC 360 it was observed by the Honourable Supreme Court as under:---
"Accordingly we consider it a fit case in which the petitioner would be well advised if he raises the pleas sought to be advanced before this Court, in the departmental forum in the first instance and also to pursue the normal channels of appeals/revision/reference to the higher departmental forums. The apprehension expressed by the learned counsel that the departmental authority are likely to support the issuance of notice after this contest before the superior Courts, is unfounded at least at this stage. The learned Income Tax Officer having thought, prima facie, that he had the jurisdiction, issued the impugned notice. There would be nothing wrong in his hearing the party concerned on the relevant objections including that of his jurisdiction. He would not make it a question of personal prestige if he finds that the notice was issued without jurisdiction. On the other hand if he feels satisfied that he had the jurisdiction, same would apply to his such a determination accordingly. It is well-known that a plea regarding the assumption of jurisdiction by a tribunal or Court is available to a litigant even when appearing before the Highest Court in the country. It is, therefore, hoped and expected that when an objection in this behalf is raised before the learned officer concerned, he would dispassionately examine it on its own merits and render a decision which he believes, bona fide, to be correct. "
12. Following the rule in the precedent case noted supra and also keeping in view the fact that controversial issues requiring factual inquiries are involved, 1 am of the view that the petitioners, if so advised, in the first instance, may raise all the objections to the jurisdiction of respondent No. 1 arid also against the maintainability of the proceedings or issuance of the notice under section 17 of the Wealth Tax Act before respondent No. 1, who I will decide the same, as a preliminary step, after giving opportunity of hearing to the petitioners, in accordance with law on its own merits and keeping in view the observations hereinabove.
All these petitions are disposed of with the above observations.
M.B.A./M-931/KOrder accordingly.