KHURRAM SAGHIR INDUSTRIES, LAHORE VS COMMISSIONER OF INCOME-TAX, ZONE-A, LAHORE
2001 P T D 781
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
Messrs KHURRAM SAGHIR INDUSTRIES, LAHORE
versus
COMMISSIONER OF INCOME-TAX, ZONE-A, LAHORE
C.T.R. No. 107 of 1991, decided on 26/10/2000.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.13(1)(2) & 136(1)---Re-assessment---Requirement of Object---Income-tax Authorities without prior separate approvals assessments under Ss. 13(1) & 13(2) of Income Tax Ordinance, Contention by the Authorities was that a subsequent consolidated was obtained---Validity---Requirement of prior approval was safeguard the interest of the assessee to avoid jurisdiction vested in Assessing serve the purpose as the same would be a fait accompli---Two approvals were required to be obtained and simultaneous grant of by the Authorities did not fulfil obtained under Ss. 13(1) & 13(2) of Income Tax Ordinance, 1979, against the law.
Commissioner of Income-tax v. Muhammad Kassim 2000 PTD 28l and Messrs V.N. Rakhani & Company v. m. v. Lakatoi Express and 2 other PLD 1994 SC 894 ref.
(b) Interpretation of Statutes-----
----Ambiguity in language of statute---Where there is ambiguity in the language of the statute the same has to be interpreted in favour of assessee or citizens.
Messrs B.P. Biscuit Factory Ltd. v. Wealth Tax Officer 1996 SCMR 1470 ref.
(c) Interpretation of statutes---
---- Powers of Court---Court is not supposed to add or substract any word so as to give the' statute meaning other than the one which obviously and plainly flows or can be inferred from it.
Asanyasi Rao and another v. Government of Andhra Pradesh (1989) 178 ITR 31 and Sri Venkateswara Timber Depot v. Union of India and others (1991) 189 ITR 741 ref.
(d) Interpretation of statutes---
---- No provision of enactment is to be treated as redundant or surplus.
(e) Administration of justice---
--When law requires something to be done in a particular manner then the same must be done in that manner or may not be done at all.
Shahbaz Butt for Petitioner.
Shafqat Mehmood Chohan for Respondent.
ORDER
At the instance of the assessee, an individual, at the relevant time, deriving income from manufacture and sale of spare parts of oil expellers, the Lahore Bench of the Income-tax Appellate Tribunal Lahore has framed the following questions of law said to have arisen out of their consolidated order recorded on 29-8-1987 for the assessment years 1982-83 to 1984-85:---
"Whether in the facts and circumstances of the case, prior approval of the IAC has to be obtained separately under sections 13(1) and 13(2) of the Ordinance one after the other or a combined approval could be obtained under both these subsections"?
2. For the assessment years involved the returns filed by the assessee under section 59(1) of- the Ordinance disclosing incomes respectively at Rs.12,500, Rs.18,100 and Rs.18,500 were accepted in the first instance. Subsequently on receipt 'of a complaint reassessment proceedings were initiated which resulted in framing of assessments in the three years respectively at Rs.2,00,000, Rs.78,100 and Rs.97,500. In the process for the assessment year 1982-83 the Assessing Officer made two additions under section 13(1)(c) and section 13(2) of the Ordinance at Rs.70,000 and Rs.75,600. The first addition was made in respect of undisclosed investment in machinery while the second addition was made in respect of the investment made in construction of Factory building.
3. The learned first appellate authority CIT(Appeals), Lahore maintained both additions in principle though their amounts were, respectively reduced to Rs.70,000 and Rs.50,000.
4. On further appeal the Tribunal maintained the order of the Commissioner (Appeals). The contention of the assessee that the required two approvals under section 13(1) and under section 13(2) of the Ordinance having not been obtained both additions were bad in law did not find favour with the Tribunal. A Division Bench whereof disagreed with the assessee that two separate approvals, one after the other, should have been obtained by the I.T.O. before making the additions. Although the Tribunal agreed that I.A.C.'s approval was necessary both for the determination of value of the expenditure or investment yet they opined that these approvals could be obtained simultaneously at the time of making of additions. According to the learned Tribunal it was immaterial, as to whether the approval of the I.A.C. was taken one after the other or simultaneously. They were of the view that two separate considerations were involved in two approvals. Firstly, under section 13(2) the I.A.C. was required to see before granting approval if the value adopted by the I.T.O. was reasonable and not arbitrary. On the other hand, according to the Tribunal under section 13(1) I.A.C. was required to see as to whether the explanation offered by the assessee with regard to the nature and source of investment/expenditure was satisfactory. Accordingly they concluded that purpose of the two approvals was sufficiently served if these considerations were kept in mind and therefore, it was immaterial as to whether the approval of the I.A.C. was taken one after the other or simultaneously.
5. After hearing the learned counsel for the parties we are of the view that following provisions of law at the relevant time certainly required obtaining of two approvals, one after the other and that simultaneous grant of approval by the IAC did not fulfil the intention of law. At the time of making assessment the second proviso to section 13 read as under:---
"Provided further that in cases referred to in clauses (aa) (e) such income shall not be chargeable to tax unless prior approval of the IAC has been obtained."
6. Further, subsection (2) of section 13 at the relevant time read as under:---
"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 Income-tax Officer too low, the Income-tax Officer may determine after giving a reasonable opportunity to the assessee of being heard, and with the prior approval with the IAC a reasonable value or the amount whereof as the case may be and all the provisions of subsection (1) shall have the effect accordingly."
7. The use of word "prior" in the second proviso to subsection (1) of section 13 and the word "with the prior approval" of the IAC were subsequently omitted by Finance Act, 1922. Earlier these were inserted b3 Finance Act, 1980.
8. The use of word "prior" in second proviso to subsection (1) of section 13 and in subsection (2) mikes it very clear that two "prior" separate approvals of the IAC were required where an Assessing Officer was to make addition to the declared value of any valuable property. The provisions of section 13 of the Income Tax Ordinance, 1979 were earlier available in law, the Income-tax Act, 1922 as section 4(2)(d). In the case relied upon at the bar for the assessee re: Commissioner of Income-tax v. Muhammad Kassim (2000 PTD 280) a Division Bench of the Karachi High Court while interpreting the parallel provisions of section 4(2d) of the repealed Act observed that the contention of the revenue if accepted would amount to treating as redundant or surplus the clear provisions of the enactment. In the view of their Lordships that could not be done inasmuch as full effect to the words of statute had to be given. Reliance in that aspect was placed upon re: Messrs V.N. Rakhani & Company v. M.V. Lakatoi Express and 2 others (PLD 1994 SC 894).
9. The learned Division Bench also referred to the aforesaid provisions of section 13 of the Ordinance to seek strength for the interpretation adopted by them. It was observed that before amendment by Finance Act, 1992 section 13 of the Ordinance provided for two separate and independent approvals of IAC in the case where the Income-tax Officer intended to make any addition to the declared income of assessee by way of enhancement or increase in the value of the property. Further that the first approval was provided by subsection (2) of section 13 while the second approval was provided in the second proviso to subsection (1) of section 13 of the Ordinance.
10. Learned counsel for the assessee submits and we will agree that even if there was an ambiguity in the language used in the statute, it had to be interpreted in favour of the assessee or the citizens as laid down by the apex Court in re: M/s. B.P. Biscuit Factory Ltd. v. Wealth Tax Officer (1996 SCMR 1470). He is also right in pointing out that in the presence of clear words used in the statutes i.e. "prior" the Court is not supposed to add or subtract any word so as to give the same meaning other than the one which obviously and plainly flows or can be inferred from it. The members of the learned Tribunal in our opinion attempted to 'read down' the words "prior used twice in provisions as stated earlier. Although this method of interpretation is at times accepted yet this was not the case in which reading down" of a provision could be employed. The doctrine of "reading down" of a provision as detailed in re: Asanyasi Rao and another v. Government of Andhra Pradesh (1989) 178 ITR 31 Sri Venkateswara Timber Depot v. Union of India and others (1991) 189 ITR 741 was certainly not attracted to the facts in hand. The interpretation as adopted by the learned Tribunal is certainly against the well-established principle that no provision of an enactment is to be treated as redundant or surplus. We are also not in agreement with the learned Tribunal that simultaneous approval of the IAC served the purpose and object of the provisions. In the first instance when law requires something to be done in a particular manner then it must be done in that manner or may not be done at all. Secondly to say that simultaneous approval adequately served the purpose of the provision is factually not correct. Obviously the requirement of prior approval was meant to safeguard the interest of the assessee to avoid arbitrary exercise of jurisdiction vested in the Assessing Officer. A simultaneous approval normally will not serve the purpose of the provision's because more often than not a simultaneous approval would be a fait accompli. Lastly as remarked by the learned Division Bench of the Karachi High Court in the aforesaid judgment even if there was any doubt or -ambiguity in the language the interpretation favourable to the assessee had to be adopted as laid down by the apex Court in re: M/s B.P. Biscuit Factory Ltd. (Supra).
For the aforesaid reasons we are of the considered view that two separate prior approvals under section 13(2) and in proviso to section 13(1) of the Ordinance were required and a combine approval obtained under both these subsections or of the draft assessment order did not fulfil the requirement of law.
Q.M.H./M.A.K./K-54/L Order accordingly.