DATA DISTRIBUTION SERVICES VS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 8, COMPANY ZONE-I, LAHORE, 2000 PTD-LAHORE-HIGH-COURT-LAHORE 2427 (2000)

Income Tax Ordinance (XXXI of 1979)---

----Ss.65, 59(1) & 23(18)---Constitution of Pakistan (1973), Art. 199-- Constitutional petition---Self-assessment---Additional assessment-- Deductions--Assessment was made/finalized under Self-Assessment Scheme- Assessing Officer issued show-cause notice under S.65, Income Tax Ordinance, 1979 on the ground that principal company was responsible for the advertisement expenses under the agreement executed between the assessee and principal company but the assessee had also claimed the advertisement expenses in their respective assessment years---Assessee contended that principal company was responsible for media and other major advertisement expenses while the local advertisement expenses were incurred by the assessee according to the amended agreement between the assessee and principal company---Assessing Officer issued another notice to assessee-- Assessee made representation to Commissioner of Income-tax in respect of the second notice who did not take any action---Constitutional petitioner Maintainability ---Constitutional petition and parawise comments when put in juxtaposition, brought the case of the assessee in the area of disputed question of facts---High Court had no jurisdiction to resolve the disputed question of facts in Constitutional jurisdiction---Constitutional petition was not maintainable against the show-cause notice and assessee could not be allowed to bypass jurisdiction vested by law in the Special Tribunal---No merit having been found in the Constitutional petition same was dismissed by the High Court.

2000 PTD 263; Muhammad Younas Khan's case 1993 SCMR 618 and Muhammad Muzafar Khan v. Muhammad Yousaf Khan PLD 1959 SC 9 rel.

Philip's Company's case 1990 PTD 389; Edulji Dinshaw Ltd. v. I.T.O. 1990 PTD 155; 1992 PTD 1; M/s. Julian Hoshang Dinshaw Trust's case 1989 PTD 1010; 1993 PTD 693; Shagufta Begum's case PLD 1989 SC 360; AIR 1961 SC 372; A. N. Roy C. J. H. R. v. Khone M. H. Big AIR 1975 SC 1268; P. Pottery Works v. I.T.O. AIR 1977 SC 529; AIR 1979 (118) ITR 1; Dr: H. K. Mahtab v. I.T.O. 1981 PTD 74; Commissioner of Income-tax, Delhi v. M.K. Smt. Pratap Kumari of Alwar 1982 PTD 59; Alahram Builders (Pvt.) Ltd. v. Income-tax Appellate Tribunal 1993 SCMR 29; 1998 SCMR 1725; I.T.O. and another v. Messrs Chappal Builders 1993 SCMR 1108; Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan and others 1993 SCMR 493; Messrs Bashir & Co., Lakkar Mandi, Jhang Road, Lyallpur v. The Income-tax Officer, B-Ward Lyallpur and another 1968 SCMR 997 ref.

Syed Abrar Hussain Naqvi for Petitioner.

Shafqat Mehmood Chohan, Legal Adviser for Respondents.

Date of hearing: 17th April, 2000.

JUDGMENT

I intend to decide Writ Petition No. 14208 of 1999; W. P. No. 14209 of 1999 and W. P. No. 14210 of 1999 by one consolidated judgment having similar facts and law.

2. The brief facts giving rise to these writ petitions are that the petitioners are the assessees, submitted their income tax return for the assessment years 1995-96; 1996-97 and 1997-98 which were accepted by the respondents under section 59(1) of Ordinance; tax were calculated in I.T.30-B. The respondents issued show-cause notice to the petitioners to re open the case for the aforesaid assessment year's on the ground that the principal company was responsible for the advertisement expenses under the agreement .executed between the parties but the petitioners had also claimed the advertisement expenses in their respective assessment years to the following effect as is evident from the income tax return submitted by the petitioners:

The petitioners submitted replies of the notices and controverted the allegations levelled in the notices arid took the stand that the Principal was responsible for media and other major advertisement expenses and the clause of agreement referred to, by respondent No. l did not cover advertisement expenses incurred by the petitioners. The petitioners also submitted certificate of the principal to the effect that principal had borne media and other major expenses while other advertisement expenses were incurred by petitioners; that, advertisement agreement initially executed between. the petitioners and principal on 1-9-1988 which was subsequently amended on 1-7-1994 wherein clause 7 of agreement was amended and it was clarified that the advertisement expenses mentioned in clause 7 would be the expenditure incurred on the media while local expenditure was to be incurred by the petitioners'.

2. The petitioners counsel submits that petitioners have explained their position before respondent No. l that petitioners did not conceal their income, therefore, respondent No. l has no jurisdiction whatsoever to issue notice to petitioners under section 65(1) of I.T.O. He further submits that ingredients mentioned in section 65 are not attracted in the present case as no new facts were brought on record. The action of respondents. is result of mala fide and uncalled for as notice did not base on any definite and correct information. The petitioners being aggrieved by the action of respondent No. l submitted representation to respondent No. 2, who did not take any action on his representation till date; that respondent No. l sent another notice to the petitioners on 11-11-1998, the reply was submitted by the petitioners. He further submits that respondent. No.l has asked for wealth tax return from the petitioners which is not in accordance with section 65(1) of I.T.O. 1979-as the same was omitted in the year 1980. This fact alone is sufficient that the action of respondent No. l is not based on any new facts or definite information. The action of respondents is -not in accordance with law laid down by the superior Courts. He relied upon Philipa Company case (1990 PTD 389). He also relied upon the following judgments:

"Edulji Dinshaw Ltd. v. 1.T.0. (1990 PTD '155); (1992 PTD 1); M/s. Julian Hoshang Dinshaw Trust's case 1989 PTD 1010."

3. The learned Legal Advisor of respondents submits that writ petitions are not maintainable against the show-cause notice. He relied upon (2000 PTD page 263); This Court has no jurisdiction to resolve the factual controversy in Constitutional jurisdiction; that writ petitions are not maintainable as the petitioners have alternative remedy before respondent; that petitioners did not approach this Court with clean hands; that petitioners never informed regarding the amendment dated 1-7-1994 made in respect of clause 7 of agreement executed on 1-9-1988 between the principal and petitioners. The proceedings were initiated against the petitioners under section 65 of Income Tax Ordinance, 1979 on 10-9-1998, the petitioners did not disclose in reply that agreement executed between the petitioners and principal on 1-9-1998 and was subsequently amended and contained clause 7. This fact brings the case of petitioners in the area of that the same is after thought as no such amendment was specified in the earlier reply of notice submitted by petitioners. The new facts have come on record at the time of scrutinizing the case of principal who has also claimed advertisement expenses, therefore, ingredients of section 65(1) of Income Tax Ordinance, 1979 are attracted in full force. He further submits that assessment of petitioners qua the impugned years were made by the respondents under section 59(1) of Income .Tax Ordinance, 1979 which were made by respondent No. 1 without application of conscious mind. In support of this contention he relied upon (1993 PTD 693); that petitioners have alternative remedy before Department and writ petitions are not maintainable against show-cause notice. He relied upon Shagufta Begum's case (PLD 1983 SC 360); (2000 PTD 263); that section 23(18) is not applicable in case of petitioners it relates to partly and wholly expenses incurred by the petitioners. He summed up his arguments that expenses claimed by the petitioners incurred by them on advertisement is deemed to be incurred by petitioners on behalf of principal.

In rebuttal, the petitioner's counsel submits that judgment of this Court is distinguished on facts and law as the case law relied by learned Legal Advisor are not arising out- of the show-cause notice; that writ petitions are maintainable against the show-cause notice; he relied upon the following judgments:

(AIR 1961 SC 372); (AIR 1975 SC 1268) A. N. Roy C. J. H. R. v. Khone M. H. Big.

(AIR 1977 SC 592); (AIR 1979 (118) ITR 1) P. Pottery Works v. I.T.O.

(1982 PTD 59) (1981 PTD 74) -Dr. H. K. Mahtab v. I.T.O. Commissioner of Income Tax Delhi v. M.K. Smt. Pratap Kumari of Alwar.

He further submits that there is no prohibition in clause 18 of section 23 of Income Tax Ordinance to claim allowance but respondent No. l did not consider this aspect of the case; that action of respondent No. l is not in accordance with the mandatory provisions of section 24 of Income Tax Ordinance. He further submits that judgment relied by Legal Advisor on Pak Arab's case is distinguished on facts and law. He relied upon (1993 SCMR 29); Alahram Builders (Pvt..) Ltd. v. Income-tax Appellate Tribunal. He submits that in this case the Tribunal decided the case against the assessee who instead of tiling reference filed writ petition which was dismissed. (1998 SCMR 1725), in this case assessee filed writ petition during the pendency of appeal before the Tribunal. (1993 SCMR 1108) I.T.O. and another v. M/s. Chappal Builders in this-case the assessee filed writ petition against show-cause notice which was accepted and the department filed petition before Hon'ble Supreme Court and leave to appeal was granted which was subsequently withdrawn by the Hon'ble Supreme Court. (1993 SCMR 493) M/s. Pakistan Tobacco Co. Ltd. v. Government 4 Pakistan etc. in this case the appeal of assessee was pending adjudication before the Tribunal and the writ petition was dismissed against show-cause notice. (1968 SCMR 997) M/s. Bashir & Co. Lakkar Mandi Jhang Road Lyalplur v. The Income-tax Officer B Ward Lyaplur and another; in this case final order has been passed by the I.T.O. against which writ petition was filed and dismissed. PLD 1989 SC 360, Shagufta Begum. v. The I.T.O. in this case Hon'ble Supreme Court has accepted the contention of Department that the writ petition 1s not maintainable against show-cause notice keeping in view the particulars/facts of the case; he further submits that contention of learned Legal Advisor is not in accordance with contents of notice issued by respondents to petitioners. The only ground taken in the notice was that according to the agreement principal has to pay the expenses.

4. I have given my anxious consideration to the contentions of learned counsel for the parties and perused the record. It is better and appropriate to reproduce paras.5, 6 and 8 of writ petition arid also paras. 5, 6 and 8 of parawise comments to resolve the controversy between the parties which is as under:---

"para. 5. That the respondent No.l was also informed that the distribution agreement executed on 1-9-1988 was subsequently amended on 1-7-1994 wherein clause 7 of the agreement was amended Ad it was clarified that the advertisement expenditure mentioned in clause. 7 would be the expenditure incurred on the media while the local expenditure was to be incurred by the petitioner. Copy of the agreement is attached as Annexure 'D' and copy of amendment made on 1-7-1994 is attached as Annexure 'E'."

"para. 5 of parawise comments:---

Not admitted;

That the petitioner never informed regarding the said amendment made in respect of clause 7 of agreement executed on 1-9-1988. If at all there exists as specified in Annexure 'E' and amended form of agreement dated 1-7-1994, the same shall be -considered as an afterthought as no such amendment was specified earlier during the course of proceeding while invoking sections 65 of the Income-tax Ordinance, 1979 in the assessee's Letter Nos.TCT/98, 261, dated 8-6-1998 and J-CT/98 391, dated 10-9-1998. Moreover, being sister concern, such arrangement is just to avoid the legal proceedings. It is also submitted that no such material was considered during the original assessment proceedings.

Para. 6 of writ petition

"That in spite of the proper explanation made by the petitioner, the respondent No.l still insisted that the petitioner had submitted inaccurate particulars of income which amounted to concealment of income and, therefore, section 65(1) of the Income Tax Ordinance, section 65(1) of the Income-Tax Ordinance (hereinafter referred as the Ordinance) was attracted. This letter was duly replied and again the position was explained to the respondent No. l Copy of this notice dated 1-9-1998 is attached herewith as Annexure 'F' and the reply thereto is attached as Annexure 'G'."

Para. 6 of parawise comments.

"Not admitted

The petitioner, had furnished reply and the same is under consideration and will be decided on merit at the time of finalization of the proceedings:" .

Para. 8 of writ petition

"That the petitioner replied to the aforementioned notice of section 65 on 10-10-1998 that the notice issued by him was uncalled for being not based on any definite and correct information and was requested to withdraw the notice. Copy of the reply is attached as Annexure 'J' . "

Para. 8-of parawise comments.

"Incorrect;

As the material available with respondent No.l was not available during the course of original assessment proceedings, hence action was taken under section 65 on the basis of new and definite information."

In case aforesaid paragraphs of parawise comments and writ petition are put l in juxta position, then it brings the case of petitioners in the area of disputed question of facts. It is settled proposition of law that this Court has no jurisdiction to resolve . the disputed question of facts in Constitutional jurisdiction as the principal laid down by the Hon'ble Supreme Court in Muhammad Younas Khan's case (1993 SCMR 618). The petitioner's counsel appeared in M/s. Pak. Arab Fertilizer (Pvt.) Ltd. v. D. C. Income-tax (2000 PTD 263) and cited almost all the case law which was considered by this Court and laid down principle that writ petition is not maintainable against show-cause notice and also observed that party cannot be allowed to by-pass jurisdiction vested .by law in special Tribunal. As mentioned above I have already dismissed the writ petitions qua the similar controversy on the question of law in IVI/s. Pak. Arab Fertilizer (Pvt.) Ltd.'s case (supra). It is settled proposition of law that previous decision should have been accepted and binding on me as per principle laid down by the Hon'ble Supreme Court in Muhammad Muzafar Khan. v. Muhammad Yousaf Khan (PLD 1959 SC (Pakistan) (9).

In view of what has been discussed above, there is no merits in these writ petitions and the same are dismissed with no order as to costs.

C.M.A./M.A.K./D-6/LPetitions dismissed.